416 F.2d 71 (9th Cir. 1969), 22162, Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke and Liquors, LTD.

Docket Nº:22162, 22162-A, 22162-B.
Citation:416 F.2d 71
Case Date:September 08, 1969
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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416 F.2d 71 (9th Cir. 1969)

JOSEPH E. SEAGRAM AND SONS, INC., and The House of Seagram, Inc., Appellants,









Nos. 22162, 22162-A, 22162-B.

United States Court of Appeals, Ninth Circuit.

September 8, 1969

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J. Garner Anthony (argued) of Robertson, Castle & Anthony, Honolulu, Hawaii; White & Case, New York City, for Joseph E. Seagram & Sons, and The House of Seagram Inc.

Martin Anderson (argued) of Anderson, Wrenn & Janks, Honolulu, Hawaii, for McKesson & Robbins.

Herbert Y. C. Choy (argued) of Fong, Miho, Choy & Robinson, Honolulu, Hawaii, for Barton Distilling & Barton Western Distilling Co.

Fred R. Mardell, Chicago, Ill., for Barton.

Maxwell M. Blecher (argued), Joseph L. Alioto, Peter J. Donnici, San Francisco, Cal., Vernon F. L. Char (argued) of Damon, Shigekane & Char, Honolulu, Hawaii, for appellee.

Before MERRILL, BROWNING and DUNIWAY, Circuit Judges

DUNIWAY, Circuit Judge:

This is an antitrust suit for treble damages, brought under 15 U.S.C. § 15. The case was tried to a jury. Plaintiff recovered a judgment against all defendants for $65,000, trebled, plus $50,000 attorneys' fees and costs, a total of $246,938.54. Defendants appeal. We reverse.

While the complaint charged that the defendants had violated sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1, 2), the section 2 charge was dropped. Thus the judgment rests upon a finding that the defendants had formed 'a contract, combination in the form of trust or otherwise,

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or conspiracy, in restraint of trade or commerce.' (15 U.S.C. § 1).

1. The basic facts.

Plaintiff Hawaiian Oke and Liquors, Ltd. is a corporation whose business was distributing liquors at wholesale in the State of Hawaii. It claims that the defendants combined or conspired to, and did, put it out of business.

There are three sets of defendants. (1) Joseph E. Seagram & Sons, Inc. a corporation, (Seagram) is a large distiller, manufacturing alcoholic beverages. The House of Seagram, Inc., a corporation (House of Seagram), is a wholly owned subsidiary of Seagram, and distributes Seagram's products. Within its corporate structure there are certain administrative divisions, each of which is called a 'company': Among them are Calvert Distillers Company (Calvert), Four Roses Distillers Company (Four Roses) and Frankfort Distillers Company (Frankfort). (2) McKesson & Robbins, Inc. (McKesson) is a corporation which, among other things, conducts a wholesale liquor distributing business in many parts of the United States, including Hawaii. (3) Barton Distilling Company, a corporation, (Barton) is a manufacturer of alcoholic beverages. Barton Western Distilling Co., a corporation, (Barton Western) is a wholly owned subsidiary of Barton.

In June 1965, plaintiff was the sole distributor in Hawaii of all Calvert Products, of all 'Four Roses' brand Four Roses products, and of two of Frankfort's products. There were three separate written contracts between plaintiff and House of Seagram covering these products, one for each division. Each was for one year and was to expire on July 31, 1965. Plaintiff was also sole distributor of all but one of Barton's products, under an oral agreement terminable by either party on reasonable notice. The 'Kessler' brand Four Roses product, the one Frankfort product and the one Barton product not included in these arrangements were distributed by McKesson.

For reasons that are disputed, Calvert's 'president,' Murphy, proposed to Cotler, McKesson's vice-president, that McKesson become Calvert's distributor in Hawaii. This was in May 1965. McKesson was already distributing Seagram's 7 Crown, the leading blended whiskey in Hawaii, and V.O., both distributed by the Seagram Company, another division of House of Seagram. Murphy therefore asked McKesson to establish a separate sales organization, a 'separate house', for the Calvert line, thinking that otherwise the Calvert line would not get adequate attention from McKesson's salesmen. McKesson also wanted to establish a 'second house' with Calvert the primary line, if it were to take the Calvert line. There was another meeting at Calvert's New York City office on June 3, at which were present Cotler, Maloney and Kauhane of McKesson, Murphy and Fleischman of Calvert, and Yogman of Seagram. The McKesson people favored the Seagram group's proposal.

All parties knew what appellee refers to as 'an economic fact well known to all of them,' that it would be necessary for the new separate house to have additional lines. At the meeting this was mentioned, as was McKesson's desire to get other Seagram lines.

The need for additional lines includes the fact that a distributor needs both some name brand, high profit lines, known as 'Class A,' and some lower priced 'Class B' lines. Calvert's line is Class A. It was therefore necessary for McKesson, when it was approached by Calvert, to look for one or more Class B lines. Barton's line is Class B. Frankfort and Four Roses each had both Class A and Class B lines.

McKesson was already doing considerable business with Barton on the mainland. It was interested in becoming Barton's distributor in Hawaii. It had broached the subject with Barton in April. It again approached Barton after the June 3 meeting.

About June 7, Maloney, who was McKesson's West Coast representative, had

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returned to California, and he called Friedman of Barton on the telephone. Later in June Friedman and Weinstock of Barton met with Maloney of McKesson, and Maloney solicited the distributorship of Barton products in Hawaii for McKesson's proposed new sales force. Weinstock expressed interest. On about June 15 Maloney and Cotler of McKesson decided to go ahead with the new distributorship. There is evidence from which the jury could infer that by that time Barton had agreed with McKesson to transfer its line to the new McKesson house, and that the three House of Seagram divisions had also agreed with McKesson to transfer their lines to the new McKesson house.

Plaintiff urges that the evidence supports further inferences as follows: McKesson wanted the complete deal, and would not go ahead without it. It was the prime mover in getting Barton, Four Roses and Frankfort to go along, and those three, with Calvert, all went into the new arrangement together, knowing that the deal was conditioned on the participation of each.

There were no communications between anyone representing any Seagram corporation or division and any representative of the Barton corporations. Neither at the trial nor here does plaintiff assert that the Seagram and Barton corporations made an express agreement with each other. What it does say, in substance, is that, regardless of whether one or more of the three House of Seagram divisions agreed to make McKesson its distributor before Barton did, or whether Barton was the first to agree, each went ahead knowing that, unless the others also did so, the new house would not be established.

On June 25, Calvert told plaintiff that it would not renew its contract. On June 28, Four Roses did the same, as did Frankfort on July 2. Barton's Friedman came to Hawaii on July 5 and visited plaintiff. The same day, Friedman visited McKesson's Kauhane. Next day, Friedman called his superior, Weinstock. Friedman then notified plaintiff that Barton was going to switch to McKesson, the change to be effective August 31. McKesson called its new distributorship and sales force 'Portside.'

Each of the House of Seagram divisions and Barton knew that plaintiff was the distributor of its own line and of the others' lines. They therefore knew that the change to Portside would deprive plaintiff of the major portion of its business. Plaintiff urges that the jury could infer (1) that they knew that the change would destroy plaintiff's business and (2) that it did destroy plaintiff's business.

Other pertinent facts will be stated as we consider appellant's arguments.

2. No unreasonable restraint was proved.

In this part of this opinion, when we say 'Seagram' we refer to the Seagram group. Plaintiff asserts that the agreement between Seagram, McKesson and Barton was intended to and did take the distributorship of Seagram and Barton products from plaintiff. This, it says, is a group boycott, and a group boycott is unlawful per se under section 1 of the Sherman Act. It further urges that, in such a case as this, the defendant's business motives are immaterial. That was its position in the trial court. It asked the trial court to so instruct the jury, and the court did so.

Plaintiff did not assert that defendant's primary purpose was either to put plaintiff out of business, or to compel plaintiff to conform its conduct to any anti-competitive objectives of the defendants. It offered no evidence to support either of such possible theories; it offered no instructions to support either of such possible theories.

Appellants argue that the Seagram and Barton decisions to transfer the business to McKesson were made independently, because Seagram and Barton each believed that McKesson would do a better job for it. They further argue that, even if there was an understanding between Seagram, Barton, and McKesson, that they would do what they did, such understanding

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was not a group boycott, and so did not violate section 1. In the following discussion, we assume that such an understanding did exist, the jury being presumed to have so found under the court's instructions.

The court...

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