FLORISTS'NATIONWIDE TEL. DEL. NET.-AMERICA'S PHONE-ORDER FLORISTS, INC. v. FLORISTS'TEL. DEL. ASS'N

Citation371 F.2d 263
Decision Date03 January 1967
Docket Number15720.,No. 15719,15719
PartiesFLORISTS' NATIONWIDE TELEPHONE DELIVERY NETWORK — AMERICA'S PHONE-ORDER FLORISTS, INC., Plaintiff-Appellant, (Appellee in No. 15720) v. FLORISTS' TELEGRAPH DELIVERY ASSOCIATION, a corporation, Defendant-Appellee, (Appellant in No. 15720).
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

COPYRIGHT MATERIAL OMITTED

Francis J. McConnell, Thomas C. McConnell, John Borst, Jr., Lowell N. Elsen, Chicago, Ill., for Florists' Nationwide Telephone.

Melville C. Williams, William A. Carey, Chicago, Ill., Arnold & Porter, Washington, D. C., Dickinson, Wright, McKean & Cudlip Detroit, Mich., of counsel, for Florists' Telegraph Delivery Ass'n.

Before SCHNACKENBERG, KNOCH and CASTLE, Circuit Judges.

CASTLE, Circuit Judge.

This antitrust action was brought in the District Court by the plaintiff, Florists' Nationwide Telephone Delivery Network — America's Phone-Order Florists, Inc., (hereinafter FNTDN) against the defendant, Florists' Telegraph Delivery Association, (hereinafter FTD). Plaintiff FNTDN sought to recover treble damages, and an award of injunctive relief. In its second amended and supplemental complaint FNTDN alleged among other things, that defendant FTD and its members co-conspirators were engaged in a continuing combination and conspiracy to unreasonably restrain trade in and to monopolize or attempt to monopolize for FTD the business of providing flower wire order1 services to retail florists, in violation of Sections 1 and 2 of the Sherman Act (15 U.S.C.A. § § 1, 2). It was alleged that the combination and conspiracy consisted of a continuing agreement, understanding and concert of action by FTD and its member co-conspirators to cause FTD members to cease and refrain from doing business with and from using the flowers-by-wire services of plaintiff FNTDN, in order to eliminate FNTDN as a competitor and to destroy its business. And that for the the purpose of carrying out the combination and conspiracy FTD adopted and promulgated membership rules, violation of which subjects the offending subscribing florist to suspension or revocation of his FTD membership, which are designed and intended to prevent FTD members who are also subscribing florists of FNTDN from advertising their affiliation with FNTDN and to prevent such FTD members from permitting their names or shops to be listed in FNTDN's membership directory.

FTD's answer denied the allegations above referred to, and denied FTD's participation in any conspiracy or that it had otherwise violated the antitrust laws.

Plaintiff FNTDN filed a demand for a jury trial, and following such trial the jury returned a general verdict in favor of FNTDN and assessed its damages in the amount of $150,000. The District Court entered judgment on the verdict in the trebled amount of $450,000 together with costs and a reasonable attorney's fee. The court denied defendant FTD's motion for judgment in accordance with its motion for a directed verdict2 or, in the alternative, for a new trial.

With respect to the claim for injunctive relief, the court, without further hearing, made and entered findings of fact and conclusions of law upon the basis of which it entered an order denying FNTDN's prayer for injunctive relief.

Plaintiff FNTDN appealed from the judgment order denying it injunctive relief. (Appeal No. 15719). Defendant FTD appealed from the money judgment against it. (Appeal No. 15720).

In its appeal from the money judgment against it FTD contends that the District Court refused to instruct the jury on FTD's theory of defense and thereby committed error requiring reversal, and that the evidence adduced to establish FNTDN's damages was too speculative and conjectural to sustain the verdict.

In FNTDN's appeal from the denial of injunctive relief against FTD it is contended by FNTDN that the trial judge was estopped by the jury's verdict from entering findings contrary to issues decided by the jury, and that having established a continuing antitrust violation FNTDN was entitled to an injunction as a matter of law.

The record discloses that FTD is the oldest and the leading organization of its kind in the United States. It was organized in 1910 as a voluntary association and later became a not-for-profit membership association incorporated under the laws of Michigan. FTD's membership includes the leading florists in each significant community in the United States. It has a membership of approximately 11,000 retail florists. There are about 22,000 such florists in the United States. FTD's principal function is the operation of a clearing house through which its members clear payment of flower orders exchanged between them, and which provides the mechanism that enables its members to accept, transmit and fill intercity orders — an order placed by a consumer in one city for the delivery of flowers in another city or community. The consumer's payment for such an order is received by a local FTD member florist who sends the order for execution to a fellow FTD florist of his own choosing in the destination city. The selection is made from the FTD membership list or directory. The consumer's florist accounts to FTD for the payment he receives. The destination florist fills the order from his own stock, in reliance upon the guaranty of the FTD clearing house that he will be paid. FTD is supported by annual membership dues, plus advances of 5% on orders handled for members by its clearing house. Such advances are used to defray clearing house costs and the expense of advertising and promotional activities performed by FTD on behalf of all of its members.

FNTDN was organized in 1958 and incorporated in 1959 as a Delaware corporation for profit. Its founder and president is Thomas O'Brien, an FTD member since 1939, and the owner-operator of both retail and wholesale florist establishments in Chicago, Illinois. FNTDN offers its franchises, for which an annual fee is paid, to selected FTD members but its membership is limited to one FTD florist per city. FNTDN does not operate a flower order clearing house. Its members, being also FTD members, utilize FTD's clearing house for the clearance of flower orders exchanged between them. The principal services FNTDN provides its franchisee-members are the furnishing of a directory of its "selected" members, each of whom is represented to be the best, or one of the leading FTD florists, in the particular city in which he is located; dual listings in the "yellow pages" advertising section of telephone directories under each of FNTDN's compound names "Florists' Nationwide Telephone Delivery Network" and "America's Phone-Order Florists"; and the central purchasing of floral supplies at cost savings.

In 1961 FTD adopted two new rules which became effective July 17, 1961, and provided:

"No Active Member shall permit the publication of his shop name as a part of any list or directory of FTD florists a purpose of which is to encourage or influence Active Members appearing on said list or in said directory to exchange orders between themselves to the exclusion of other Active Members of FTD."

and:

"No Active Member shall advertise or hold out to the public in any manner with respect to flowers-by-wire orders that he offers an exclusive flowers-by-wire service, when other FTD members offer FTD service in the same area."

Subsequent to the publication of such rules FNTDN experienced a decline in its membership and an increase in the percentage of rejections in connection with franchises offered to prospective members. Within a period of eighteen months all but seven of FNTDN's members had either resigned from FNTDN or permitted their FNTDN franchises to lapse at the renewal dates.

The core of FTD's defense to both the damage claim and the claim for equitable (injunctive) relief is that the dominant purpose of FNTDN is centered in a scheme which involves misuse of FTD's clearing house facilities by those FTD members who are franchised by FNTDN to, in effect, boycott all other FTD members by exchanging intercity flower orders between themselves to the exclusion of other FTD members, and through such exclusive reciprocation obtain for each FNTDN member the major share of wire orders for the delivery of flowers in the city in which such member is the sole franchisee of FNTDN; that in furtherance of this purpose FNTDN advertises its franchisees as "exclusive representative" in such manner and context as is designed to deceive and mislead the public into believing that the FNTDN member is the only local florist offering "flowers-by-wire" service or is an FTD member preferred by FTD over its other members; that the FTD rules complained of are but reasonable methods of self-protection against such boycott and unfair and deceptive advertising practices on the part of FNTDN, are designed to preserve fair competition between FTD's own members and to safeguard the integrity of FTD's own services for the benefit of its members, and do not violate Section 1 or 2 of the Sherman Act or afford any basis for liability on the part of FTD for any losses sustained by FNTDN; and that FNTDN's purpose and conduct preclude it from recovery on its damage claim and bar it from equitable relief under the "clean hands" doctrine.

Such defense, if established, would so bar FNTDN from both recovery of damages and injunctive relief. Union Leader Corporation v. Newspapers of New England, Inc., 1 Cir., 284 F.2d 582, cert. denied, 365 U.S. 833, 81 S.Ct. 747, 5 L.Ed.2d 744, rehearing denied, 365 U.S. 890, 81 S.Ct. 1026, 6 L.Ed.2d 201; Cf. Crest Auto Supplies, Inc. v. Ero Manufacturing Company, 7 Cir., 360 F.2d 896, 900. In Union Leader it is pointed out (284 F.2d 582, 586-587):

"To the extent that a party has merely sought to offset the other\'s illegal acts it has not acted with a wrongful intention, nor should its conduct result in public injury. In such a case there would be no reason to encourage recovery by
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