American Can Co. v. Russellville Canning Co.

• Decision Date: 27 July 1951
• Docket Number: No. 14141.,14141.
• Citation: 191 F.2d 38
• Parties: AMERICAN CAN CO. v. RUSSELLVILLE CANNING CO.
• Court: U.S. Court of Appeals — Eighth Circuit

191 F.2d 38 (1951)

AMERICAN CAN CO. v. RUSSELLVILLE CANNING CO.

No. 14141.

United States Court of Appeals Eighth Circuit.

July 27, 1951.

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Charles A. Horsky, Washington, D. C. (Harry L. Shniderman, Washington, D. C., John P. Woods, Daily & Woods, all of Fort Smith, Ark., and Covington, Burling, Rublee, O'Brian & Shorb, Washington, D. C., on the brief), for appellant.

Walton Hamilton, Washington, D. C. and J. M. Smallwood, Russellville, Ark. (Arnold Fortas & Porter, Washington, D. C., on the brief), for appellee.

Before SANBORN, JOHNSEN, and RIDDICK, Circuit Judges.

SANBORN, Circuit Judge.

The Russellville Canning Company, a partnership, of Russellville, Arkansas, owned and operated a canning plant at that place from June 2, 1943, to December 1, 1948, when it sold its physical assets to a corporation. The partnership, during the period June 2, 1943, to December 31, 1947, bought all of the cans which it used in its business of canning vegetables from the American Can Company, under a written contract. The total number of cans which were supplied by the Can Company to the partnership was 24,018,526, of a net invoice value of $568,559.10.

Upon the claim that it had been injured in its property and business by discriminatory practices of the American Can Company with respect to prices charged and facilities furnished, the Russellville Canning Company, as plaintiff, in 1946 brought this action against the Can Company for treble damages under Section 4 of the Clayton Act, 38 Stat. 730, Sec. 15, Title 15 U.S. C.A.¹ A supplement to the complaint was filed in 1949. The plaintiff asserted that the practices complained of were violative of Section 2 of the Clayton Act as amended by the Robinson-Patman Act, 49 Stat. 1526, Sec. 13, Title 15 U.S.C.A.²

The defendant (appellant) denied that it had violated the Act in suit and that the plaintiff had been damaged by any of the practices of which it complained.

The issues were tried to the court in April, 1949. It determined that three of the practices asserted by the plaintiff to be violative of the Act had injured the plaintiff in its property and business to the extent of $125,000. These practices were: (1) equalization of freight with Fort Smith, Arkansas, on carloads of packers' cans shipped by the defendant to the plaintiff at Russellville, Arkansas, from factories in Indiana and Illinois during the years 1943, 1944 and 1945; (2) the granting by the defendant of a discount of 45¢ per thousand cans to the Morgan Packing Company, of Austin, Indiana, which had a plant adjoining a factory of the defendant and took delivery of cans from the factory over a cable conveyor or runway; and (3) the granting of quantity discounts by the defendant to its largest customers. The District Court concluded that these three trade practices were unlawful and actionable, and entered judgment against the defendant for $375,000, together with $42,000 attorney's fees. See Russellville Canning Co. v. American Can Co., D.C., 87 F.Supp. 484.

The defendant asserts that there was no adequate evidentiary or legal basis for the District Court's determination that the practices referred to were unlawful and had damaged the plaintiff in its business or property.

There has been no attempt by the parties to abbreviate the voluminous record on appeal. It contains a vast amount of detail. A statement of all the facts disclosed by the evidence would not be justified. We shall try to state enough of the evidentiary facts to show the situation which gave rise to the controversy and to this appeal.

The Ozark region, in which Russellville, Arkansas, is located, comprises that portion of the Arkansas River valley between Little Rock, Arkansas, and Fort Gibson, Oklahoma. The region is and has been a source of supply of spinach and green beans for the local canners of those vegetables. Many local canning plants buy their raw material in that area. The region probably ranks second in the volume of spinach canned.

The Good Canning Company, of Fort Smith, Arkansas, an old and long-established concern owned by W. H. Blaylock, in 1941 built a branch canning plant at Russellville, Arkansas. The vegetable growers in that area wanted a plant to buy their produce. The major reason for establishing a plant there was the belief that raw materials would be cheaper. There was also an abundance of unskilled labor obtainable there at minimum cost. The freight differential on cans as between Fort Smith and Russellville was not a deterrent. The places are about 80 miles apart.

The plant at Russellville started operations as a branch of the Good Canning Company in July, 1942. Arvel F. Blaylock, a brother of W. H. Blaylock, was its manager and continued as such until June 1, 1943. W. H. Blaylock died in July, 1942.

On June 1, 1943, Arvel F. Blaylock, his wife, Elsie, his son Horace, then about 23 years of age, his daughter Lorene, about 20, and four members of the White family, formed a partnership under the name Russellville Canning Company, and purchased the Russellville plant. The purchase price was $60,000, which was borrowed from a bank and paid back out of the profits from the first nine months of operation. After the acquisition of the plant, the partnership spent $15,000 or $20,000 for new structures and equipment. Total invested capital did not exceed $80,000.

Arvel F. Blaylock was the exclusive manager of the business. He had an assistant named Keene, who left in 1945. Blaylock's children, Horace Blaylock and Lorene Blaylock Mackey, worked at the plant. Horace was plant Superintendent except while in the Army from September, 1944, to September, 1945, and for some months after his return from the service. His duties were to hire and fire and to see that production was maintained. He had nothing to do with sales. His father, Arvel F. Blaylock, was in full charge of the business until incapacitated by illness. Lorene Blaylock Mackey was at first a payroll clerk and later a secretary or stenographer.

In 1945 and 1946, Arvel Blaylock, because of illness, was able to work only part time. In 1947 he was obliged to stop work entirely, and the responsibility of operating the plant fell upon Horace and Lorene. Arvel Blaylock died in January, 1948, before the trial of this case. His evidence was taken by deposition in May and June of 1947, and is in the record. He had been in bad health for several years prior to his death.

The contract under which the defendant agreed to supply all the cans which the plaintiff might require in its operations up to December 31, 1947, was dated April 24, 1943. It was like the contract which the defendant had had with the Good Canning Company while the Russellville plant was a branch of that Company.

With respect to freight equalization, the contract of April 24, 1943, provided: "Cans named in this contract shall be delivered as wanted by Buyer, upon reasonable notice to Seller, F. O. B. Seller's factories, freight equalized with St. Louis, Missouri, except on such sizes and styles of cans as may not be made at Seller's St. Louis, Missouri factory. Sizes and styles of cans Seller may not make at its St. Louis, Missouri factory shall be F. O. B. point of shipment."

The defendant in June, 1943, when the plaintiff commenced operations, was not manufacturing packers' cans in its factory in St. Louis, nor was it equalizing freight on packers' cans shipped to its customers in the Ozark region with either St. Louis or the place from which the cans were shipped. Since June 2, 1941, the defendant had shipped all cans consigned to its customers in the Ozark region with freight equalized with Fort Smith, although none of its contracts with them called for such freight equalization.

In the can manufacturing industry, it has been the practice for a can manufacturer to locate a can factory as near as possible to each large canning area, in order to supply the needs of can customers in that area. Distance from a factory affects canners both with respect to the time and cost of delivery. In 1941, the majority of can factories were within 100 miles of canning plants. If a competitor of the defendant built a factory nearer a canning area than any factory of the defendant, the defendant's practice was to equalize freight on cans shipped to its customers, in the area, with the competitor's factory if doing so would give the customers a lower delivered cost. While the defendant in 1941 had no factory of its own in St. Louis making packers' cans, it equalized, prior to June 2, 1941, freight with St. Louis on such cans shipped to its customers in the Ozark region, because one of its competitors had in 1937 established a plant in St. Louis which made such cans. This was the packers' can factory then nearest to the Ozark region. Prior to the establishment of this rival factory in St. Louis, packers' cans made by the defendant at its factories in Maywood or Hoopeston, Illinois, or Terre Haute, Indiana, were shipped to the Ozark region with freight equalized with whichever of those three points would produce the lowest delivered price to the consignee. Equalizing freight with St. Louis gave the Ozark canners a lower freight cost than freight equalization based on a factory point in Indiana or Illinois, although St. Louis was more than four hundred miles from the Ozark region.

The defendant, between the years 1939 and 1943, had supply contracts with fifty or sixty canners in the Ozark region. In response to a demand from its customers there, in or about 1940, that something be done to improve their competitive position as it was affected by freight rates, the defendant made an investigation to determine the economic feasibility of building a factory at Fort Smith. The defendant decided that the demand for cans in the Ozark region was not then great enough to warrant the establishment of a factory at Fort Smith at that time, but would be later. Nearly...