534 F.2d 639 (5th Cir. 1976), 75-3770, Southland Reship, Inc. v. Flegel

Docket Nº:75-3770.
Citation:534 F.2d 639
Party Name:SOUTHLAND RESHIP, INC., Plaintiff-Appellant, v. S. Leslie FLEGEL, Individually and d/b/a Periodical Sales of America, et al., Defendants-Appellees.
Case Date:July 02, 1976
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 639

534 F.2d 639 (5th Cir. 1976)

SOUTHLAND RESHIP, INC., Plaintiff-Appellant,


S. Leslie FLEGEL, Individually and d/b/a Periodical Sales of

America, et al., Defendants-Appellees.

No. 75-3770.

United States Court of Appeals, Fifth Circuit

July 2, 1976

Page 640

Charles H. Kirbo, Lanny B. Bridgers, John Izard, Atlanta, Ga., Bob Burleson, Temple, Tex., for plaintiff-appellant.

Alan E. Popkin, St. Louis, Mo., for defendants-appellees.

Appeal from the United States District Court for the Northern District of Georgia.

Before TUTTLE, AINSWORTH and CLARK, Circuit Judges.

TUTTLE, Circuit Judge:

This is an appeal by Southland Reship, Inc. from the denial on the merits by the district court of a permanent injunction sought by Southland both on Sherman Act and on Georgia state law claims. Southland also appeals from the district court's consolidation, pursuant to Rule 65(a)(2) of the Federal Rules of Civil Procedure, of its motions for a preliminary and permanent injunction, arguing that it was thereby deprived of its right to a jury trial on liability.

Southland Reship, Inc. is a company that provides distribution and associated services of books, magazines, periodicals and newspapers to retailers. A Texas corporation organized in 1974, Southland purchased the Rome, Georgia Reship Division of another reshipper, Mid-Continent News Co., a subsidiary of ARA Services, Inc., on Sept. 27, 1974. This transaction resulted from an FTC consent decree involving ARA and Mid-Continent and requiring Mid-Continent to divest itself of the Rome Division. Until the entry of Periodical Sales of America into the market, the company owning the Rome Division (first Mid-Continent and then Southland) was the only wholesale distributor for rural retailers in Georgia, Alabama, Mississippi, Florida, North and South Carolina, Kentucky and Tennessee. Thus, they had a virtual eight-state monopoly.

Page 641

Periodical Sales of America was organized in January and February of 1975, as a reshipper in the Southeast by S. Leslie Flegel. Flegel and several other corporations which he controls and which are involved in reshipping are among the appellees; only one of these corporations, Periodical Shippers of America, Inc., a Missouri corporation organized in December 1974, operates in the Southeast. The district court found that the relationship between Periodical Shippers and Periodical Sales was unclear from the record.

Another appellee, Don Hart, was manager of Reship at Mid-Continent at the time of the purchase by Southland and was personally responsible for preparing the Mid-Continent contracts, accounts receivable, and other records that were turned over to Southland. Furthermore, in the course of his employment he had committed to memory the financial details, including employees' salaries, relating to the Rome Division. In the Fall of 1974, Flegel and Hart, who were acquaintances, had discussed Hart's possible employment by Flegel in one of his reship operations. On January 15, 1975, subsequent to suffering a heart attack, Hart was relieved as manager of Reship at Mid-Continent; he immediately phone Flegel to discuss employment. Flegel and Hart met in St. Louis, Mo., toward the end of January; they agreed that Hart would come to work for Flegel, and they discussed other employees of both Southland and Mid-Continent whom they thought might be interested in employment by Flegel. Although they contemplated forming a new corporation, they did not in fact do so; they simply conducted business in the Rome Division area under the name of Periodical Sales of America.

In setting up Periodical Sales, Flegel and Hart planned a meeting in St. Louis to be attended by Mid-Continent and Southland supervisors and routemen. This meeting was originally scheduled for Feb. 7-8, 1975; since both Mid-Continent and Southland scheduled employees' meetings for Feb. 7, the meeting was moved up and commenced on Feb. 5. None of appellant's employees was under contract, and when appellant heard of the St. Louis meeting it announced that any routeman attending would be fired. One routeman, James Brock, did attend. Upon deciding to accept employment with Flegel and Hart, he gave notice to Southland.

At least two of appellant's officers were aware of the meeting and of the fact that two of...

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