Empire Rayon Yarn Co. v. American Viscose Corp.
| Decision Date | 31 March 1958 |
| Citation | 160 F. Supp. 334 |
| Parties | EMPIRE RAYON YARN CO., Inc., Plaintiff, v. AMERICAN VISCOSE CORPORATION, Fred Malina, Arthur Malina, Edythe M. Charnas and Fred H. Diamond, co-partners doing business as Malina Company, Gutner Brothers Corporation and Shawmut, Inc., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Sweet, Reinitz, Peskin & Sweet, New York City, Jacob Greenwald, New York City, of counsel, for plaintiff.
Jackson, Nash, Brophy, Barringer & Brooks, New York City, John G. Jackson, Raymond M. Tierney, New York City, of counsel, for defendant American Viscose Corp.
Silver & Bernstein, New York City, Nahum A. Bernstein, New York City, of counsel, for defendant Malina Co.
Herbert S. Greenberg, New York City, for defendant Gutner Bros. Corp.
E. Compton Timberlake, New York City, for defendant Shawmut, Inc.
These are cross-motions for summary judgment in a treble damage suit wherein the plaintiff charges the defendants with alleged illegal price discrimination in violation of § 2 of the Robinson-Patman Act, 15 U.S.C.A. § 13.
The plaintiff deals in viscose rayon yarn. Its activities are of a twofold nature: (1) the converting or processing of yarn purchased by it from the major producers of rayon and then selling the processed yarn, and (2) the reselling of yarn in the original condition and package as purchased by it from major manufacturers or producers. In this latter instance plaintiff asserts it functions as a jobber. The basis of its charge of price discrimination centers about only that merchandise which it purchased, or seeks to purchase, in connection with its jobbing activities from the defendant American Viscose Corporation, hereinafter referred to as "American".
American is a major producer of unprocessed viscose rayon yarn. The bulk of its product is sold and distributed directly by it to the textile trade. But with respect to a small portion of its output it has found it more economic and convenient to sell to jobbers who sell and service smaller units of the textile trade at lower selling costs than would be the case if it sold directly.1 American in carrying out this policy through the years has designated three firms to act as jobbers and they are named as co-defendants in this action. They are referred to hereafter as the "jobber defendants". The defendant Gutner acts only as a jobber, i. e. selling yarn in the original condition and package as purchased from manufacturers whereas the other two co-defendants Malina and Shawmut function as jobbers and processors. The defendant Malina is a jobber only of American's products whereas the other two jobber defendants also resell rayon of other manufacturers.
All rayon sales by American, whether to the jobber defendants, the plaintiff, or to other purchasers have always been made at American's published price list. However, in the instance of the jobber defendants American, pursuant to written agreements with each, grants a five per cent discount from the list price on all yarn resold by them in the original packages. It is this discount which plaintiff contends unlawfully discriminates against it and is the hard core of the controversy. The gist of the plaintiff's complaint, in its four separately stated causes of action charging violations of subdivisions (a), (c) and (e) of § 13 of 15 U.S.C.A. is that American has denied it the same discount although it is qualified to render the same jobbing services to American as that rendered by the jobber defendants.
Accordingly, the plaintiff in addition to money damages seeks to compel American to grant it the same discount and the same terms and conditions of sale as granted to the three jobber defendants with respect to merchandise purchased for resale and not for processing or else to cancel the discount granted to co-defendants.
American justifies the discount on the ground that the jobber defendants render a functional service in the distribution, selling and servicing of American's products to smaller units and at lower selling cost than would be the case if American itself sold directly to such consumers. In short, it contends that not only is there justification for the discount granted to the jobbers but it has validly and reasonably classified its customers into processors and jobbers based on functional differences in the services performed.
Under its contracts with the jobbers the discount is allowed not, upon the original purchases by them from American, but only after proof has been submitted of compliance with specified conditions, enumerated in detail, which are intended to assure that the discount is applied only to that merchandise which the jobbers resell in the original packages at list prices.2 Under this circumstance the jobber defendants pay to American the same published list price, as does the plaintiff and all other purchasers, for that portion of their purchases which they use in processing as distinguished from reselling.
According to the defendants the function and services the jobber defendants perform with respect to the distribution of rayon yarn include the maintenance of large inventories, the maintenance of warehousing facilities, the risk of price fluctuations on inventories, the assumption of credit risk upon sales to consumers, the maintenance of a selling force, advertising of American's products, and the furnishing of technical assistance to users of rayon. The plaintiff disputes that the services are rendered on behalf of American but rather that they are functions which each jobber performs for itself and on its own behalf in the redistribution of rayon. Somewhat anomalously, based upon its assertion that it has the necessary facilities and qualifications to perform for American the jobbing services to the same extent as the jobber defendants, the plaintiff seeks the same discount which, if in fact is discriminatory, would in turn discriminate against other customers of American who might claim to be qualified to be accorded a jobber classification.
American questions that plaintiff's qualification to deal in American's products as a jobber, as distinguished from its processing activities, is equal to that of the jobber defendants and challenges that plaintiff was a purchaser for resale of its merchandise or performed the same services rendered by the jobber defendants. What in effect American contends is that the purchases made by plaintiff were for its own consumption in processing rayon and hence it was not in competition with the jobber defendants in the distribution of rayon on a resale basis. Thus in addition to a dispute on this essential issue, there is also the basic issue whether the defendants in fact performed services in the distribution of American's products different from those of the plaintiff which justified the discount. Another essential issue in dispute is whether American's...
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Empire Rayon Yarn Co. v. American Viscose Corporation
...judgment were made. Both motions were denied by the district court because of the existence of challenged issues of fact. 160 F.Supp. 334 (S.D.N.Y. 1958). After additional discovery and abandonment of the § 2(a) claim, the present motions and cross-motions for summary judgment were made in ......
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Empire Rayon Yarn Co. v. American Viscose Corporation
...based, and; (4) whether the jobber defendants had knowingly received discriminatory discounts. Empire Rayon Yarn Co. v. American Viscose Corp., 160 F.Supp. 334 (S.D.N.Y.1958). In the ensuing five years there have been extensive discovery proceedings, a stipulation of facts and Empire has vo......