Continental Baking Company v. Utah Pie Company

• Decision Date: 25 May 1965
• Docket Number: 7309.,7308,No. 7306,7306
• Citation: 349 F.2d 122
• Parties: CONTINENTAL BAKING COMPANY, a Delaware corporation, Appellant, v. UTAH PIE COMPANY, a Utah corporation, Appellee. CARNATION COMPANY, a Delaware corporation, Appellant, v. UTAH PIE COMPANY, a Utah corporation, Appellee. PET MILK COMPANY, a Delaware corporation, Appellant, v. UTAH PIE COMPANY, a Utah corporation, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

349 F.2d 122 (1965)

CONTINENTAL BAKING COMPANY, a Delaware corporation, Appellant, v. UTAH PIE COMPANY, a Utah corporation, Appellee.

CARNATION COMPANY, a Delaware corporation, Appellant, v. UTAH PIE COMPANY, a Utah corporation, Appellee.

PET MILK COMPANY, a Delaware corporation, Appellant, v. UTAH PIE COMPANY, a Utah corporation, Appellee.

Nos. 7306, 7308, 7309.

United States Court of Appeals Tenth Circuit.

May 25, 1965.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

John H. Schafer, Washington, D. C. (A. Pratt Kesler, Salt Lake City, Utah, Roy M. Anderson and Gordon A. Thomas, Rye, N. Y., Welborn & Dufford, Denver, Colo., Robert J. Muth, Covington & Burling, Washington, D. C., of counsel, on the briefs), for appellant Continental Baking Co.

Peter W. Billings, Salt Lake City, Utah (G. Kenneth Handley, Jr., Salt Lake City, Utah, and James R. Baird, Jr., Los Angeles, Cal., of counsel, on the briefs), for appellant Carnation Co.

George P. Lamb, Washington, D. C. (Lee, Toomey & Kent and Carrington Shields, Washington, D. C., Gene Mayfield, St. Louis, Mo., Paul Thatcher, Ogden, Utah, of counsel, on the briefs), for appellant Pet Milk Co.

Joseph L. Alioto and Matthew P. Mitchell, San Francisco, Cal. (G. Joseph Bertain, Jr., San Francisco, Cal., Robert W. Hughes, Salt Lake City, Utah, and Maxwell M. Blecher, San Francisco, Cal., of counsel, on the briefs), for appellee Utah Pie Co.

Before MURRAH, PHILLIPS and LEWIS, Circuit Judges.

PHILLIPS, Circuit Judge.

Utah Pie Company¹ brought this action against Continental Baking Company,² Carnation Company,³ and Pet Milk Company⁴ under Title 15 U.S.C. (1958 Ed.) §§ 15 and 26.

The complaint charged that Continental, Carnation and Pet entered into a combination and conspiracy to restrain interstate commerce and monopolize such commerce in violation of §§ 1 and 2 of the Sherman Act (15 U.S.C.A. §§ 1 and 2), to be effected by destroying the competition of Utah Pie through the weakening of its capital structure and the destruction of its profits, and to violate § 2(a) of the Clayton Act, as amended by the Robinson-Patman Act (15 U.S.C.A. § 13(a)), by price discriminations in the State of Utah, effected by selling their frozen pies at prices "below cost" in the State of Utah and at lower prices in such state than they charged for their frozen pies "in other western states."⁵

The case came on for trial in February, 1963. At the close of the evidence, each defendant properly moved for a directed verdict in its favor on the § 2(a) claims asserted by Utah Pie. Each motion was denied.

The jury returned a verdict in favor of the defendants on the conspiracy claim and a verdict against each defendant on Utah Pie's § 2(a) claims. Each defendant, in accordance with Rule 50(b) of the Federal Rules of Civil Procedure, made a timely and proper motion to set aside the verdict against it and enter judgment n. o. v. in its favor on Utah Pie's § 2(a) claims. Each motion was denied.

The jury also returned a verdict in favor of Continental on a counterclaim asserted by it, charging a § 2(a) violation by Utah Pie. On Utah Pie's n. o. v. motion, the court set aside that verdict and entered judgment on the counterclaim in favor of Utah Pie, notwithstanding it had not moved for a directed verdict in its favor on the counterclaim.

On February 23, 1963, a judgment was entered for Utah Pie against each defendant for treble the amount of the verdict against it, and permanently enjoining each of the defendants from violating § 2(a). Appeals from each of such judgments have been taken. The injunction portion of the judgment was stayed by this court, by order entered March 21, 1963.

The § 2(a) claims and the conspiracy claim were tried at the same time and the evidence in support of them was commingled. Certain facts, if set out and considered in isolation, would present a distorted picture of these cases. To get a true perspective of them, the whole factual picture and the relation of each of the facts to each other must be brought into proper focus and considered together.

In each appeal, except Continental's appeal from the judgment in favor of Utah Pie on Continental's counterclaim, there is set up as a ground for reversal that the evidence was insufficient to support the verdict in favor of Utah Pie, or warrant the injunction. Since we conclude the judgments in favor of Utah Pie must be reversed on that ground, we shall not consider the other grounds urged for reversal.

Many of the facts relating to the § 2(a) claims are pertinent in all of the appeals, and we will undertake to set out a portion of such facts in a general statement of facts. We will then set out separately the facts particularly applicable in each of the respective appeals.

I General Statement of Facts

The evidence in these cases covers the period 1958 to 1961, both inclusive. It is free from substantial dispute, except for a few statements of opinions or conclusions not based on any substantial underlying proof.

The offering prices, selling prices, sales volumes, percentages of market shares, earnings, and other like matters; the tables and charts which appear in this opinion; and the appendices annexed hereto are all based on uncontroverted documentary evidence, some of which was introduced by the plaintiff and some by the defendants.

The phrase "frozen fruit pies" is sometimes used in the frozen pie industry in a broad sense and as including frozen apple, cherry, boysenberry, peach, pumpkin and mince pies, although the latter two are not, strictly speaking, fruit pies. In its broad sense, the phrase does not enbrace frozen cream pies, such as lemon cream, chocolate cream, cocoanut cream, and the like.

The frozen pies involved in these appeals are those embraced in the phrase "frozen fruit pies" in its broad sense.⁶ We will hereafter refer to them simply as "frozen pies."

The phrase "frozen fruit pies" is also used in a more narrow sense, as embracing only the strictly fruit pies, and not including mince, pumpkin, or the cream pies. Frozen fruit pies in that narrow sense will be referred to hereinafter as "frozen fruit pies."

Utah Pie, a Utah corporation, owned and operated by the Rigby family, was in the fresh pie business for nearly 30 years prior to 1957. It marketed its fresh pies in Salt Lake City and other points in Utah, in Las Vegas, Nevada, Grand Junction, Colorado, Farmington, New Mexico, Evanston, Wyoming, and at one other city in Nevada.

Faced with a declining volume and a substantial loss in its fiscal year ended October 31, 1957, Utah Pie, in the latter part of that year, entered into the frozen pie business.

It had much of the facilities needed for the frozen pie business in its old plant. It opened a new plant in 1958, which had a capacity, at least by 1961, on a three-shift basis, of 40,000 frozen pies a day, or about one and one-half million cases of frozen pies per year. There are six pies in a case. It had adequate refrigeration for fruit, production facilities, and storage of frozen pies. Its frozen pie business was well managed and its sales and transportation costs were low. It had the only frozen pie plant located in the Salt Lake City market, which enabled it to deliver to its customers frozen pies in small quantities.

The frozen pie business is comparatively new and highly competitive.

The six western states of California, Washington, Oregon, Utah, Arizona and Colorado embrace a portion of the Inter-Rocky Mountain and West Coast regions. In each of such states there are one or more separate and distinct frozen pie market areas, which comprise a large metropolitan center and the territory closely adjacent thereto. There are distinct frozen pie market areas in Los Angeles, San Francisco, Seattle, Portland, Spokane, Salt Lake City, Phoenix and Denver. The periphery of each of such market areas is nearly the same as that of the area in which its metropolitan newspapers circulate, that, because retail advertising is the lifeblood of the frozen pie industry and crucial to volume sales. The current retail price in a particular market area at a particular time is generally fixed by the prices at which the chain stores and cooperative grocery organizations advertise their frozen pies in the Thursday and Friday editions of the local newspapers, published and circulated in that market area.

During the period 1958 to 1961, inclusive, retailers of frozen pies in the Salt Lake City market advertised Utah Pie's brands a great many more times than they did brands of each of the other manufacturers selling in that market.⁷

The manufacturers and distributors of national brands, who sell throughout the United States, the manufacturers and distributors of regional brands, who sell in several of such local market areas, and sometimes a local manufacturer and distributor, whose single plant is located in a particular market area where his principal business is done, but who also may sell in other market areas in the same region, usually make up the group competing in a local market area. More than 30 different brands are sold in the six western states referred to above, and the number of nation-wide manufacturers of frozen pies is over 200.

The brands, or labels, used by the parties to these appeals were as follows:

Utah Pie "Utah," "Frost `N' Flame," "Mayfresh," and "Sonny Boy" Carnation "Simple Simon" Continental "Morton's" Pet "Pet-Ritz" and "Swiss Miss."

Utah Pie and Pet also manufactured frozen pies for Safeway Stores, Inc.,⁸ under the latter's label, "Bel-air."

The price in a particular market area depends on the number and identity of the competing manufacturers, the competitive factors in such market, and the extent of the thrust or pressure of such factors at a particular time. A local manufacturer and seller, with his plant located in a particular market area, because of his low distribution and selling costs, preferences normally given to a local business, and his...