Ohio-Sealy Mattress Mfg. Co. v. Sealy, Inc.

• Decision Date: 12 October 1978
• Docket Number: OHIO-SEALY,Nos. 77-1239,77-1240,s. 77-1239
• Citation: 585 F.2d 821
• Parties: , 1978-2 Trade Cases 62,299 MATTRESS MANUFACTURING COMPANY, Sealy Mattress Company of Houston, Sealy Mattress Company of Puerto Rico, Inc., Sealy of the Northeast, Inc., and Sealy Mattress Company of Georgia, Inc., Plaintiffs-Counterdefendants Appellants-Cross-Appellees, v. SEALY, INCORPORATED, Sealy Spring Corporation Indiana, Sealy Spring Corporation East, Sealy Spring Corporation West, Sealy Mattress Company of Colorado, Inc., Sealy Mattress Company of Northern California, Inc., Sealy Mattress Company of Southern California, Inc., Schnorr Manufacturing Company, Inc., Sealy Mattress Company of Florida, Inc., Sealy Mattress Company of Pittsburgh, Inc., Sealy Mattress Company of Philadelphia, Inc., Defendants-Counterplaintiffs Appellees-Cross- Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 821

585 F.2d 821

200 U.S.P.Q. 337, 1978-2 Trade Cases 62,299

OHIO-SEALY MATTRESS MANUFACTURING COMPANY, Sealy Mattress Company of Houston, Sealy Mattress Company of Puerto Rico Inc., Sealy of the Northeast, Inc., and Sealy Mattress Company of Georgia, Inc., Plaintiffs-Counterdefendants Appellants-Cross-Appellees, v. SEALY, INCORPORATED, Sealy Spring Corporation Indiana, Sealy Spring Corporation East, Sealy Spring Corporation West Sealy Mattress Company of Colorado, Inc., Sealy Mattress Company of Northern California, Inc., Sealy Mattress Company of Southern California, Inc., Schnorr Manufacturing Company Inc., Sealy Mattress Company of Florida, Inc., Sealy Mattress Company of Pittsburgh, Inc., Sealy Mattress Company of Philadelphia, Inc., Defendants-Counterplaintiffs Appellees-Cross- Appellants.

Nos. 77-1239, 77-1240.

United States Court of Appeals Seventh Circuit.

Argued April 20, 1978.

Decided Oct. 11, 1978.

As Amended Oct. 12, 1978.

Frederic F. Brace, Jr., Chicago, Ill., for appellant.

Phil C. Neal, Friedman & Koven, Chicago, Ill., for appellee.

Before FAIRCHILD, Chief Judge, MOORE, Senior Circuit Judge, ^* and PELL, Circuit Judge.

PELL, Circuit Judge.

Sealy, Incorporated (Sealy) owns trademarks for the "Sealy" brand of mattresses, mattress foundations, and other bedding products. The Sealy brand enjoys substantial national consumer popularity, and Sealy licenses its trademarks to fifteen independent manufacturers, each of which has the primary responsibility to make and sell Sealy products in a defined territory or territories. Sealy receives license royalties, provides uniform product specifications, and also provides for the benefit of its licensees substantial national advertising, product development services, engineering assistance, sales training, and a means of central negotiation for selling to national retail organizations and purchasing certain mattress components. In addition, Sealy itself manufactures and sells mattresses in seven territories, and it also manufactures spring units through three wholly-owned subsidiaries. ¹ Over 98% Of the stock of Sealy is owned by its licensees, only licensees (or their nominees) are eligible for 11 of the 14 seats on Sealy's Board of Directors, and the Board's Executive Committee is composed exclusively of licensees.

Ohio-Sealy Mattress Manufacturing Company (Ohio) is a Sealy licensee with primary responsibility for six territories. Ohio is the largest and one of the best of the Sealy licensees, producing a high quality product efficiently, selling it effectively, and compiling an enviable profit record. ²

In United States v. Sealy, Inc., 388 U.S. 350, 87 S.Ct. 1847, 18 L.Ed.2d 1238 (1967), the Supreme Court invalidated the system of exclusive manufacturing and sales territories on which Sealy then predicated its licenses. (Sealy at the time was not itself engaged in manufacturing mattresses.) Looking at "substance rather than form," Id. at 352, 87 S.Ct. 1847, the Court thought it clear that the exclusive territories were restraints imposed by a horizontal combination of potential competitors, because Sealy was obviously "a joint venture of, by, and for its stockholder-licensees (who are) themselves directly, without even the semblance of insulation, in charge of Sealy's operations." Id. at 353, 87 S.Ct. at 1850. Because the exclusive territory system operated to give each licensee an enclave free from the competition of other Sealy licensees, it amounted to an allocation of markets Per se violative of Section 1 of the Sherman Act, 15 U.S.C. § 1, ³ without regard to asserted justifications for the system. ⁴

After the Supreme Court's decision, Sealy revised its licensing agreement, eliminating exclusive selling territories. In 1971, Ohio initiated this action, complaining that Sealy had continued to effect the evils the Supreme Court condemned, albeit by more subtle means, that Sealy's methods of dealing with national retail customers also violated the Sherman Act, and that Sealy was engaged in illegal tying and price-fixing arrangements regarding certain mattress components. Damages well in excess of $6,000,000 were claimed, and declaratory and injunctive relief was sought. Sealy counterclaimed, seeking substantial damages and other relief.

The damage claims of the parties were tried before a jury over a period of four months in 1974 and 1975. Although both Sealy and Ohio had several objections to the jury's instructions, no complaint thereof is made on appeal. Ohio's evidence indicated damages on its complaint of $9,233,563 (before trebling, See Section 4 of the Clayton Act, 15 U.S.C. § 15). Sealy's counterclaim evidence indicated damages of $14,701,479. The jury rendered a general verdict for Ohio on its complaint, awarding damages of $6,814,852, and against Sealy on its counterclaim. Thereafter, the district court denied Sealy's motion for judgment n. o. v., and denied its motion for a new trial conditionally on Ohio's accepting a remittitur of 50% Of its $20,444,556 trebled damages. Ohio accepted the remittitur. After later hearings on equitable relief, the district court denied it. The court also ruled that Ohio was not entitled to interest on its judgment for the twenty-month period between the jury's verdict and the court's entry of final judgment in the case. Ohio appeals from the judgment's denial of equitable relief and interim period interest, and Sealy cross-appeals from the denial of its motions for judgment n. o. v. and for a new trial.

A fuller statement of the pertinent facts of the case will be given in the context of the issues presented for decision.

I. Sealy's Motion for Judgment Notwithstanding the Verdict

If Sealy is correct that the district court should have granted its motion for judgment n. o. v., most of the rest of the issues on appeal will be academic. ⁵ Accordingly, we consider this possibility first. In doing so, we are guided by the "well established" rule that

a motion for a directed verdict or for judgment n. o. v. is properly denied where the evidence is such that reasonable men in a fair and impartial exercise of their judgment may draw different conclusions therefrom.

Hannigan v. Sears, Roebuck and Co., 410 F.2d 285, 287 (7th Cir. 1969), Cert. denied, 396 U.S. 902, 90 S.Ct. 214, 24 L.Ed.2d 178; See also Fontana Aviation, Inc. v. Beech Aircraft Corporation, 432 F.2d 1080, 1084 (7th Cir. 1970), Cert. denied, 401 U.S. 923, 91 S.Ct. 872, 27 L.Ed.2d 826 (1971). We are

bound to view the evidence in the light most favorable to (Ohio) and to give it the benefit of all inferences which the evidence fairly supports, even though contrary inferences might reasonably be drawn.

Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 696, 82 S.Ct. 1404, 1409, 8 L.Ed.2d 777 (1962) (footnote omitted); Accord, Hannigan, supra at 288. This is particularly true in complex antitrust cases such as this one "where motive and intent play leading roles," Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962), because "(f)indings as to the design, motive and intent with which men act depend peculiarly upon the credit given to witnesses" by the trier of fact. United States v. Yellow Cab Co., 338 U.S. 338, 341, 70 S.Ct. 177, 179, 94 L.Ed. 150 (1949); Lambert Corporation v. Evans, 575 F.2d 132, 136 (7th Cir. 1978).

Ohio argues, as a threshold matter, that judgment n. o. v. was absolutely precluded by Sealy's failure to file a motion for directed verdict " at the close of all the evidence," which Rule 50(b), Fed.R.Civ.P., makes a necessary predicate of a later motion for judgment n. o. v. Sealy's directed verdict motion was made at the close of its case, I. e., after all but certain rebuttal evidence was taken. The motion was not thereafter renewed, but we agree with the district court that Sealy adequately preserved its right to a ruling on the sufficiency of Ohio's evidence. The application of Rule 50(b) in any case "should be examined in the light of the accomplishment of (its) particular purpose as well as in the general context of securing a fair trial for all concerned in the quest for the truth." Pittsburgh-Des Moines Steel Co. v. Brookhaven Manor Water Co., 532 F.2d 572, 576 (7th Cir. 1976); and See Rule 1, Fed.R.Civ.P.

Rule 50(b) serves the important purpose of ensuring that a motion for judgment n. o. v. is used only to invite the district court to reexamine its decision not to direct a verdict as a matter of law, and not, in contravention of the Seventh Amendment, to reexamine facts found by the jury. Pittsburgh-Des Moines, supra at 576. Where the court's attention is directed to a party's contention that the pertinent evidence presented entitles it to judgment as a matter of law, the motion's purpose is served. Moran v. Raymond Corp., 484 F.2d 1008, 1014 (7th Cir. 1973), Cert. denied, 415 U.S. 932, 94 S.Ct. 1445, 39 L.Ed.2d 490 (1974). Nor does the introduction of additional evidence after a directed verdict motion necessarily call for a different conclusion, especially where, as here, the district court expressly determines that "there was no probability that any evidence presented during rebuttal and/or surrebuttal could have prompted this Court to grant any motion for a directed verdict." See Moran, supra at 1012; Gillentine v. McKeand, 426 F.2d 717, 722 (1st Cir. 1970).

Another purpose of Rule 50(b) is avoidance of making a trap of a motion for judgment n. o. v. where, E. g., a directed verdict motion would point out a defect in proof that the opposing party might remedy thereafter. Pittsburgh-Des Moines, supra at 576. There was no possibility of any such trap here, where the directed verdict motion came after both parties rested their cases in chief. Any additional proof which Ohio could properly introduce on rebuttal was in no way foreclosed, and no suggestion is made that the motion for judgment n. o. v. hinged in any material way on...