Kestenbaum v. Falstaff Brewing Corp.

• Decision Date: 16 June 1975
• Docket Number: No. 74-1878,74-1878
• Citation: 514 F.2d 690
• Parties: 1975-1 Trade Cases 60,371, 1976-1 Trade Cases 60,756 Dana I. KESTENBAUM, Plaintiff-Appellee, v. FALSTAFF BREWING CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 690

514 F.2d 690

1975-1 Trade Cases 60,371, 1976-1 Trade Cases 60,756

Dana I. KESTENBAUM, Plaintiff-Appellee, v. FALSTAFF BREWING CORPORATION, Defendant-Appellant.

No. 74-1878.

United States Court of Appeals, Fifth Circuit.

June 16, 1975.

David B. Kultgen, Waco, Tex., Max Hendrick, III, Houston, Tex., for defendant-appellant.

Jack N. Price, Longview, Tex., Ed P. Magre, Cameron, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Western District of Texas.

Before GOLDBERG, CLARK and GEE, Circuit Judges:

CLARK, Circuit Judge:

This is an appeal by the defendant, Falstaff Brewing Corporation, from a jury verdict in favor of the plaintiff, Dana I. Kestenbaum, in a civil antitrust suit brought under Section 4 of the Clayton Act, 15 U.S.C. § 15, to recover damages to Kestenbaum's business as a wholesale distributor of Falstaff Beer.

The Kestenbaum distributorship was begun in 1934 by Dana Kestenbaum's father, Sam Kestenbaum, and originally encompassed within its area of primary responsibility Milam, Robertson, Burleson, Brazos, Falls and Bell counties, Texas. Prior to the years at issue in this controversy, Bell and Falls counties were transferred to other distributorships. Dana Kestenbaum became an active partner in the distributorship in 1950. He was in complete control from 1967 until he sold the distributorship in 1971, allegedly because he could no longer financially endure Falstaff's anticompetitive practices. Actually, Kestenbaum sold the distributorship territory in three separate transactions, again allegedly under duress, with Milam county going to Falstaff's Taylor, Texas distributor, Robertson county to Falstaff's Marlin, Texas distributor, and Burleson and Brazos counties to Kestenbaum's former manager.

At trial Kestenbaum asserted Falstaff had violated Section 1 of the Sherman Act, 15 U.S.C. § 1. More particularly, he charged them with: (1) price fixing, (2) employing territorial restrictions on the resale of Falstaff beer, (3) participation in a general combination and conspiracy in restraint of trade, and (4) placing restraints on his sale of the distributorship. ¹ From a jury award of 60,517.00 dollars, trebled by the trial court to 181,551.00 dollars, Falstaff has perfected this appeal.

In this court, Falstaff excepts to the trial court's charge, challenges the sufficiency of the proof of damage and questions the method employed to measure damages. The record does establish error in regard to some of Kestenbaum's contentions. The trial court having chosen not to utilize the special verdict procedure of Fed.R.Civ.P. 49(a), which would have revealed the jury's resolution of the various theories of liability advanced, ² we are left with no alternative but to reverse and remand the entire proceeding.

I

In Terrell v. Household Goods Carriers' Bureau, 494 F.2d 16, 20, (5 Cir.) rehearing en banc denied, 496 F.2d 878 (5 Cir.), cert. dismissed,419 U.S. 987, 95 S.Ct. 246, 42 L.Ed.2d 260 (1974), we stated: "In order to recover treble damages under Section 4 of the Clayton Act, (plaintiff must) prove a violation of the antitrust laws by the defendants, an injury to his business resulting from the defendants' wrongful actions, and some indication of the amount of the damage done." See Hobart Bros. Co. v. Malcolm T. Gilliland, Inc., 471 F.2d 894, 901-902 (5th Cir.), cert. denied, 412 U.S. 923, 93 S.Ct. 2736, 37 L.Ed.2d 150 (1973); Shaw v. Mobile Oil Corp., 60 F.R.D. 566, 568 (D.N.H.1973). Kestenbaum failed the second of this three-pronged test, i. e., he failed to prove an injury to his business resulting from the defendants' asserted price-fixing actions. Thus, the trial court erred in submitting the issue of price fixing to the jury.

According to Kestenbaum's testimony, at all times while he was a distributor Falstaff fixed the prices at which he sold beer to retail accounts. Until about 1966, this price fixing allegedly consisted of instructions to distributors directing that predetermined prices be instituted at specified times. During the period from 1966 until 1971 when Kestenbaum sold his distributorship, Falstaff allegedly indirectly controlled his prices by instructing him to stay competitive with other local or "popular" brands. ³ With this directive to remain competitive, Falstaff instituted a policy of automatically raising its selling price to Kestenbaum by one-half of the amount of any price increase imposed by him in adherence to Falstaff's "stay competitive" requirement. Kestenbaum claimed that this latter price-fixing scheme damaged him in the one-half increase amounts Falstaff was assessing him under its automatic price increase policy. He admitted at trial however, that he would have remained competitive in the absence of any coercion by Falstaff. The evidence further disclosed that several other Falstaff distributors who attempted to go higher than the popular price level were met with drastic reductions in sales.

Kestenbaum submits that although it is true that he would have stayed competitive with popular brands even without a directive from Falstaff, when Falstaff's requirement that he do so was coupled with its taking of one-half of all additional revenue from his price increases on retail accounts, a situation was created in which he was not free to realize the percentage of profit that could have been attained absent this requirement. To reason that the amount of this diminished profit established any measure of antitrust damage is a non sequitur in today's case. While Falstaff's increase in price to Kestenbaum may be classified as arbitrary, such increase is not itself violative of the antitrust laws, nor does it afford a basis for proof of injury even though it is coupled with a price ceiling requirement which is a per se violation. A prerequisite to Kestenbaum's recovery on this issue was a showing that the price ceiling on sales by him, disregarding the price charged to him, caused injury. Not only did he fail to prove this, he established that the wholesale price which Falstaff allegedly fixed was a proper price. While the fact of injury often involves evidentiary questions which are properly for the jury (e. g., Storey Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 562, 51 S.Ct. 248, 250, 75 L.Ed. 544, 548 (1931)), no jury issue exists where, as here, the plaintiff fails to offer any competent evidence to establish that the defendant's wrongful price-fixing activity produced injury to him.

Even if Kestenbaum had not admitted that the "stay competitive" policy was logical and proper, and had proffered evidence indicating that requiring him to meet the prices of other similar products caused him injury, this claim still would be deficient for failure to meet Terrell's third requirement that the proof give some indication of the extent of the injury. Kestenbaum claims his damages were 25,000 dollars, the sum of Falstaff's increased selling price to him, based upon one-half of all of his increases to retailers. Under the facts shown in this case, Falstaff did not violate any antitrust stricture by raising its price to its wholesalers. Kestenbaum, therefore, by introducing only the 25,000 dollar calculation to support his claim for damages for wholesale price fixing, has failed to offer any competent evidence on the amount of damage. We recognize that leniency should be permitted in showing damages in private antitrust actions, however, a damage assessment based wholly on speculation and guesswork is improper. E. g., Bigelow v. RKO Pictures, 327 U.S. 251, 264-65, 66 S.Ct. 574, 579-80, 90 L.Ed. 652 (1946). Because proper proof of injury and of damage was missing, the district judge should have directed a verdict for defendant on this aspect of plaintiff's price-fixing claim. If the jury calculated any part of its damage award on the sum of Falstaff's price increases to Kestenbaum, it was error. Under the enigmatic general verdict we cannot know whether they did or not, so the verdict cannot stand.

Plaintiff also attacks Falstaff's price promotions, in which he sold Falstaff beer at a discount, as a type of price-fixing scheme. Again plaintiff has failed to meet his burden of establishing a net economic loss. Having admitted that he would have participated in some such promotions voluntarily as a matter of sound business practice, it was incumbent upon Kestenbaum to reveal what proportion of the total costs were attributable to such voluntary promotions as well as showing what sales gains and losses he experienced before and after he unwillingly followed Falstaff's requirements. Without such proof a jury could not compute the amount of loss recoverable on a basis other than mere speculation and guesswork. Bigelow v. RKO Pictures, supra.

Kestenbaum cites Perma Life Mufflers, Inc., v. International Parts Corp., 392 U.S. 134, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968), as authority for the proposition that he has the right to recover all costs incurred in price-fixing promotions regardless of whether he was compelled to participate, or participated voluntarily. Perma Life will not support such a broad rule. While the Supreme Court did hold that an injured party may not be denied any recovery merely because he has participated to the extent of utilizing illegal arrangements formulated and carried out by others, it went on to say that by-products of a restriction inuring to a plaintiff's benefit can be considered in computing damages. Id. at 140, 88 S.Ct. 1985. ⁴ Proof of the extent of this benefit is precisely what was lacking here.

II

The trial court erred in instructing the jury that if they found that Falstaff dictated the sale price of Kestenbaum's distributorship, Falstaff would be guilty of a per se violation of the antitrust laws. ⁵ The per se rule was judicially created to deter agreements or practices constituting unreasonable restraints on trade, having such a pernicious effect on competition and so lacking in...