Hays v. United Fireworks Mfg. Co.

• Decision Date: 09 December 1969
• Docket Number: No. 22690.,22690.
• Citation: 420 F.2d 836
• Parties: P. D. HAYS and Ruth Hays, his wife, d/b/a Hays Fireworks Co., Appellees, v. UNITED FIREWORKS MFG. CO., Clipper Pyrotechnic Corporation, Zebra Distributing Company, W. Patrick Moriarty, Jack Martin and Elizabeth Moriarty, Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

420 F.2d 836 (1969)

P. D. HAYS and Ruth Hays, his wife, d/b/a Hays Fireworks Co., Appellees, v. UNITED FIREWORKS MFG. CO., Clipper Pyrotechnic Corporation, Zebra Distributing Company, W. Patrick Moriarty, Jack Martin and Elizabeth Moriarty, Appellants.

No. 22690.

United States Court of Appeals Ninth Circuit.

December 9, 1969.

Noble K. Gregory, San Francisco, Cal. (argued), Pillsbury, Madison & Sutro, San Francisco, Cal., Dore, Dubuar & Cummins, Paul C. Gibbs, Seattle, Wash., for appellants.

Charles Lonergan, Seattle, Wash. (argued), of Corbett, Siderius & Lonergan, Seattle, Wash., for appellees.

Before HAMLEY, BROWNING and ELY, Circuit Judges.

HAMLEY, Circuit Judge:

This is a civil antitrust action for treble damages involving the fireworks business in the State of Washington. The plaintiffs are P. D. Hays and Ruth Hays, his wife. They own and operate Hays Fireworks Company, a sole proprietorship engaged in the wholesale and retail fireworks business in Olympia, Thurston County, Washington.

The defendants are three other fireworks companies and three individuals: United Fireworks Mfg. Co. (United), an Ohio corporation engaged in the manufacture of fireworks; Clipper Pyrotechnic Corporation (Clipper), a California corporation engaged in the wholesale fireworks business in California;¹ Zebra Distributing Company (Zebra), a Washington corporation engaged in the wholesale fireworks business in Washington; Jack Martin; W. Patrick Moriarty and his mother, Elizabeth Moriarty.²

In their complaint, filed March 25, 1965, plaintiffs invoked sections 1 and 2 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. §§ 1, 2 and section 3 of the Clayton Act, 38 Stat. 731, 15 U.S. C. § 14. As stated in their "Contentions for Pretrial Order," plaintiffs charged that defendants participated in an unlawful combination and conspiracy to control the number of available licenses authorizing the sale of fireworks in the relevant market, prevented customers from dealing with plaintiffs or other competitors, otherwise limited the number of independent operators, deprived independent operators of their source of supply, controlled the retail price of fireworks, and discriminated in prices charged.

Plaintiffs contended that defendants used various means to accomplish these objectives, including: (1) pooling of their purchasing power, credit, and assets; (2) imposing upon their customers the requirement that they purchase all their fireworks from defendants as a condition to obtaining any fireworks from defendants; (3) exerting economic pressure upon fireworks manufacturing companies to have them abstain from selling products to plaintiffs; (4) selling their products to each other at substantially lower prices and under more favorable terms than to independent operators; (5) selling substantially identical products at lower prices in areas where defendants experienced competition than in other areas in the state; (6) securing adherence to retail price schedules through advertising and otherwise; (7) obtaining agreements from their purchasers not to compete with United and Clipper in the manufacture of fireworks; and (8) suggesting local implementing ordinances or resolutions which limited the number of licenses to be issued, gave priority to previous license holders, and contained stringent terms of insurance protection.

According to plaintiffs, the result of defendants' activities was to restrain and destroy plaintiffs' business, monopolize the fireworks industry, limit the flow of interstate commerce, and establish noncompetitive price levels.³ In their complaint, as thereafter supplemented, plaintiffs sought damages in the sum of $433,000 to be trebled. However, in an amended statement of contentions filed on October 23, 1967, plaintiffs claimed single damages in the amount of $53,820.

Defendants interposed various defenses. A jury trial resulted in a verdict against defendants for single damages in the sum of $14,500. The trial court trebled this to $43,500 and added attorneys' fees in the sum of $20,000. Judgment was entered for plaintiffs in the sum of $63,500, and defendants appealed.

Prior to January 1, 1962, the manufacture, importation and sale of fireworks within the State of Washington was governed by Chap. 174, Laws of 1951, amended by Chap. 34, Laws of 1953, and the ordinances and resolutions of municipal corporations within the state. Under the state law as it then existed, all types of fireworks could be sold if permitted by local communities. Most communities, however, banned the sale of fireworks.

In 1951, such a ban became effective in all of Pierce County, Washington, where W. Patrick Moriarty and Elizabeth Moriarty had been conducting a partnership business in the sale of fireworks.⁴ The Moriartys were therefore forced to discontinue their Pierce County business. They continued to operate, however, in other parts of the State of Washington and, later, in other parts of the country.

In 1961, the legislature of the State of Washington passed Chap. 228, Laws of 1961, a comprehensive act, effective January 1, 1962, referred to as the State Fireworks Law, now codified as RCW Chap. 70.77. This act prohibits the manufacture, import, export, possession or sale of any fireworks at wholesale or retail for any use without first obtaining a license from the State Fire Marshal. Pursuant to the provisions of RCW 70.77.315, any person may make application to the State Fire Marshal for a license to import and sell at wholesale or retail "safe and sane" fireworks within the State of Washington. "Safe and sane" fireworks are defined in RCW 70.77.135 as all fireworks with a pyrotechnic content of less than 100 grams, with only end fuses, and that are not designated by the State Fire Marshal as dangerous.

In order to sell either at wholesale or at retail "safe and sane" fireworks within a particular county, city or town within the state, it is also necessary under the State Fireworks Law to obtain a permit from the appropriate local unit of government. Some of the local ordinances provide for an unlimited number of retail "safe and sane" fireworks permits, while others limit the number corresponding to the population.

When new markets were opened for "safe and sane" fireworks in Washington in 1962, the Moriartys increased their operations in that state through defendant Zebra. From then on, according to plaintiffs, defendants engaged in the activities complained of, as summarized above.

On this appeal defendants first argue that the trial court erroneously permitted the jury to determine that certain efforts to influence public officials to obtain favorable fireworks legislation were illegal under the antitrust laws, and erroneously held that damages could be awarded for injuries resulting solely from such activities. As a legal basis for this argument, defendants rely upon the established rule that no violation of the antitrust laws can be predicated upon mere attempts to influence the passage or enforcement of laws. See United Mine Workers of America v. Pennington, 381 U.S. 657, 669-672, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965); Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 135, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961).

Defendants' efforts to influence public officials were apparently of two kinds. Defendants made a direct effort to obtain passage of local ordinances to their liking by appearing at community meetings, by contacting fraternal and other organizations which might sell fireworks at retail as a fund-raising activity, and by advertising. They also made an indirect effort in this direction by including, in some of Zebra's contracts with its dealers, a provision obligating the dealer to "(p)rovide assistance to insure passage of local legislation."

Defendants did not object to the introduction of these dealer contracts as exhibits, presumably because the contracts contained other recitals which were relevant and material. However, when counsel for plaintiffs asked W. Patrick Moriarty, called by them as an adverse witness, whether some of the Zebra contracts contained such a provision, counsel for defendants objected on the basis of the Pennington-Noerr rule referred to above. The objection was overruled, and the witness answered in the affirmative.

The answer thus given over objection conveyed no information to the jury that was not otherwise before them in the contracts received in evidence without objection. Up to this point and regardless of the merits of defendants' legal position, we think no prejudice occurred. Very soon after this trial incident, counsel for plaintiffs asked Moriarity whether Zebra consulted an attorney and requested that he prepare a form of model ordinance. While defendants' objection to this question, made on the Pennington-Noerr ground, was overruled, the answer given to the question did not prejudice defendants because it was, "I don't know."

However, defendants also call attention to observations made by the trial judge in overruling this objection, and to the court's recital of plaintiffs' contentions at the close of the trial, asserting that they in effect invited the jury to disregard the Pennington-Noerr doctrine.

In overruling the objection referred to above the court made the following observation in the presence of the jury:

"I quite agree with you that the United Mine Workers case does not impose liability for lobbying activity, but I don\'t know that it goes so far as to approve a condition in a contract of sale that the merchandise will only be sold if they will agree to lobby, and that is what I understand he is trying to prove by this contract."⁵

In its instruction to the jury at the close of the case the court said the plaintiff contended that defendants

"* * * followed a policy or practice of suggesting a local implementing ordinance or resolution for cities and counties in the State of Washington containing a provision that

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