182 F.2d 228 (7th Cir. 1950), 10001, Kiefer-Stewart Co. v. Joseph E. Seagram & Sons

Docket Nº10001.
Citation182 F.2d 228
Case DateMay 09, 1950
CourtUnited States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 228

182 F.2d 228 (7th Cir. 1950)




No. 10001.

United States Court of Appeals, Seventh Circuit.

May 9, 1950

Rehearing Denied June 13, 1950.

Paul Y. Davis, Harvey B. Hartsock, Gustav H. Dongus, Indianapolis, Indiana, Thomas Kiernan, New York City, White & Case, New York City, Davis, Baltzell, Hartsock & Dongus, Indianapolis, Indiana, of counsel for appellants.

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Joseph J. Daniels, William G. Davis, John D. Cochran, Indianapolis, Indiana, Baker & Daniels, Indianapolis, Indiana, of counsel, for appellee.

Before MAJOR, Chief Judge, and KERNER and DUFFY, Circuit Judges.

MAJOR, Chief Judge.

This is an action for damages resulting from alleged violations of Section 1 of the Sherman Act and Section 7 of the Clayton Act, Title 15 U.S.C.A. §§ 1and 18, brought pursuant to Title 15 U.S.C.A. § 15. A trial was had before a jury which returned a verdict in favor of the plaintiff in the amount of $325, 000. Thereupon, a judgment was rendered for treble the amount of the verdict, plus $50, 000 attorney fees. From this judgment defendants appeal.

Defendant Joseph E. Seagram & Sons, Inc., generally referred to as Seagram, Indiana, is an Indiana corporation and is a wholly owned subsidiary of Distillers Corporation Seagrams Ltd. of Canada (the latter not a party to this suit). Defendants Seagram-Distillers Corporation, a Delaware corporation, usually referred to as Seagram, Sales, and Calvert Distilling Company, a Maryland corporation, usually referred to as Calvert, are wholly owned subsidiaries of Joseph E. Seagram & Sons, Inc. Defendant Calvert Distillers Corporation is a Maryland corporation, usually referred to as Calvert, Sales, and is a wholly owned subsidiary of Calvert Distilling Company. Seagram, Indiana and Calvert are engaged in the manufacture of distilled spirits, and Seagram, Sales and Calvert, sales, in the sale and distribution of the liquor manufactured by their respective parent corporations. The sales and distributions thus made by the defendants extended throughout the United States, including the State of Indiana. While Calvert prior to 1945 had been a wholly owned subsidiary of Distillers Corporation Seagram Ltd., the latter corporation on April 9, 1945 transferred all its stock in Calvert to Seagram, Indiana. Thus, from that time on both Calvert and Seagram, Sales were wholly owned subsidiaries of Seagram, Indiana, and Calvert, Sales was a wholly owned subsidiary of Calvert.

Plaintiff is a wholesale drug concern which has long been engaged in the wholesale liquor business in the State of Indiana. Beginning in February 1034, it became a distributor for Seagram products and as such wholesaler extensively sold and supplied those authorized to retail liquor in that State. Plaintiff was not at any time a distributor of Calvert products, but in the latter part of 1946 accepted an offer by Calvert to become its distributor, with a commitment from Calvert to supply an agreed quantity of liquor.

Plaintiff in its brief states: 'The gravamen of plaintiff's claim, as submitted to the jury, was that as a proximate result of a conspiracy between the defendants to fix the resale price of their products, plaintiff, a liquor wholesaler, had lost the Seagram and Calvert lines of whiskies and other products, with consequent large damage to its business.' To this might be added that the theory embodied in the complaint as well as that upon which the case was tried was that the defendants entered into a price fixing conspiracy illegal per se.

It may be noted that the complaint was premised in part upon the alleged unlawful acquisition by Seagram, Indiana of the common stock of Calvert on April 9, 1945. It is alleged: 'By reason of such unlawful stock acquisition, the independent management, sales organization and sales policy, which, as aforesaid, prompted Calvert and Calvert (Sales) to expand their Indiana market in competition with defendants Seagram (Indiana) and Seagram (Sales) and to appoint plaintiff as a Calvert distributor and to contact and agree to supply Calvert products to plaintiff in competition with the products of Seagram (Indiana) and Seagram (Sales), became subject to the influence of the executive officers of Seagram (Indiana), who, by such acquisition had gained control over the Boards of Directors and over the outstanding securities of Calvert and Calvert (Sales).'

There being no proof, however, that competition between Seagram and Calvert was

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affected by reason of the former's acquisition of the latter's stock, the cause of action predicated thereon has been abandoned by the plaintiff and reliance is placed solely upon a violation of Sec. 1.

We are confronted with numerous contested issues which in the main may be stated thus:

1. That the trial court erred in refusing to direct a verdict for the defendants and in refusing to enter a judgment notwithstanding the verdict on two grounds, viz.,

(a) That the evidence was insufficient to take the case to a jury on the allegation that a 'contract, combination * * * or conspiracy' existed between the defendants in violation of Sec. 1 of the Sherman Act;

(b) That under the uncontradicted evidence the activities of the defendants even if in concert were not in restraint of trade and therefore not violative of Sec. 1 of the Sherman Act.

2. That the trial court erred in refusing to instruct the jury that no violation of Sec. 7 of the Clayton Act had been shown.

3. That the trial court erred in instructing the jury that it would constitute 'no defense to this action, even though the plaintiff and the other wholesalers entered into a conspiracy among themselves.'

There are numerous other errors assigned relative to the claimed erroneous admission and exclusion of evidence which, in the view we take of the case, need not be stated.

Plaintiff insists that there was adequate proof to present an issue for the jury as to whether defendants engaged in a conspiracy to fix the price at which their products were to be sold by the wholesale liquor dealers of Indiana, including plaintiff. On the other hand, defendants insist that there was no proof of such conspiracy but that the proof conclusively demonstrates that they pursued an independent course. We approach an appraisement of the proof with a full realization that it must be considered in a light most favorable to the plaintiff, and that the plaintiff is entitled to all reasonable inferences which may be deduced therefrom. With this thought in mind, we shall discuss the facts as they appear in plaintiff's brief, which we assume are as favorable to it as the record will justify.

During the period of O.P.A., liquor wholesalers were permitted to sell whiskies at 15% above cost but they were not permitted to include in such costs taxes imposed by the Federal or State governments. Thus, during this period of governmental regulation the profit of wholesalers was reduced to approximately 10% of the selling price. On October 23, 1946, O.P.A., regulations of liquor prices terminated. Prior thereto, plaintiff had decided upon such termination to apply its current 15% mark-up to its over-all costs, including Federal and State taxes. On October 31, 1946, a meeting was held of the Indiana Wholesale Liquor Dealers Association, attended by the plaintiff. Price changes made possible by the termination of O.P.A. were discussed. Immediately following this meeting a majority of the Indiana wholesalers, including plaintiff, filed with the Indiana Alcoholic Beverage Commission identical schedules of the increased prices on spirits, wines and cordials.

Victor A. Fischel, vice president of Seagram, Sales, shortly prior to the expiration of the O.P.A. price regulation (October 23, 1946), determined upon a policy with reference to the prices to be charged for Seagram's products in the event of the termination of O.P.A., and on November 6, 1946 sent a telegram to all wholesalers in the United States as follows: 'Despite the higher costs of production and of doing business generally, Seagram has decided to maintain former OPA prices on all brands. This decision was reached because of our sincere belief that it is not in our nor the public's interest to raise whiskey prices. By holding the price line we can win the fullest measure of public appreciation and confidence in our industry. Because the entire industry, distillers, wholesalers and retailers alike have enjoyed their most successful period in the last few years, we do not hesitate to request your support of this policy of holding the price line. We further request that you ask your retailers, both package store and on premise outlets not to increase prices either by the drink or by the

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bottle. May we have immediate assurance of your full cooperation and information on the steps you are taking to this end.'

On or about the same date this telegram was dispatched, Seagram suspended shipments to all Indiana wholesalers, including the plaintiff, because of their refusal to subscribe to the policy which Seagram had announced. On February 3, 1947, the wholesalers of Indiana, with the exception of plaintiff, filed notification with the Indiana Commission of their return to the O.P.A. method of the application of the existing 15% mark-up to only a part of the wholesaler's cost. Plaintiff refused to return to the old method and to subscribe to the policy announced by Seagram, and shipments to it were never resumed.

We now turn to the facts concerning Calvert, as shown by plaintiff's brief. Beginning in 1942, Calvert attempted on several occasions to obtain the facilities of plaintiff as one of its Indiana distributors. These overtures by Calvert culminated in...

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