Trabert & Hoeffer, Inc. v. Piaget Watch Corp.

• Decision Date: 29 July 1980
• Docket Number: No. 80-1081,80-1081
• Citation: 633 F.2d 477
• Parties: 1980-81 Trade Cases 63,574 TRABERT & HOEFFER, INC., an Illinois Corporation, Plaintiff-Appellee, v. PIAGET WATCH CORPORATION, North American Watch Corporation and Concord Watch Corporation, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 477

633 F.2d 477

1980-81 Trade Cases 63,574

TRABERT & HOEFFER, INC., an Illinois Corporation, Plaintiff-Appellee, v. PIAGET WATCH CORPORATION, North American Watch Corporation and Concord Watch Corporation, Defendants-Appellants.

No. 80-1081.

United States Court of Appeals Seventh Circuit.

Argued June 9, 1980.

Decided July 29, 1980. ^*

Ronald J. Greene, Washington, D. C., for defendants-appellants.

James S. Gordon, Chicago, Ill., for plaintiff-appellee.

Before SWYGERT and WOOD, Circuit Judges, and LARSON, Senior District Judge. ^**

PER CURIAM.

Defendants-appellants North American Watch Corporation and two subsidiaries, Piaget Watch Corporation and Concord Watch Corporation, appeal from a judgment below finding them liable under section 1 of the Sherman Act, 15 U.S.C. § 1. The district court, Judge Grady presiding, found that the defendants ceased to supply watches for resale to plaintiff Trabert & Hoeffer, Inc., a jewelry retailer, pursuant to a price-fixing agreement between defendants and plaintiff's competitors. The case was tried without a jury; voluminous documentary evidence was viewed by the district court and extensive testimony heard. The court, in addition to awarding the plaintiff $195,000 in treble damages and $43,695.10 in costs and legal fees, permanently enjoined defendants from refusing to deal with the plaintiff on the same terms and conditions (i. e., availability, price, credit, service, advertising coverage) enjoyed by other Chicago area retailers supplied by the defendants.

On appeal, the defendants urge reversal on three grounds: (1) the district court erred in finding that the defendants engaged in a price-fixing conspiracy; (2) the damages award was in error because neither the fact nor degree of damage was supported by the evidence; and (3) the injunctive relief ordered by the district court exceeded its discretion. Although the appeal was ably argued, we find no reversible error and so affirm with a slight modification of the injunctive order.

I.

The appellants first contend that there was insufficient evidence in the record to permit the court's finding of a price-fixing conspiracy. It is important to note at the outset that this court can upset the lower court's finding of an agreement only if it was clearly erroneous; we are not to weigh complicated antitrust evidence de novo, and we are obligated to defer to the trier of fact on such matters as witness credibility. Zenith Radio Corp. v. Hazeltine Research Inc., 395 U.S. 100, 123, 89 S.Ct. 1562, 1576, 23 L.Ed.2d 129 (1969); City of Mishawaka v. American Electric Power Co., Inc., 616 F.2d 976, 979 (7th Cir. 1980), cert filed, 49 U.S.L.W. 3009 (June 27, 1980). Further, in reviewing the record, we must keep in mind that the elements of a Sherman Act violation are met in a vertical price restraint conspiracy when there is evidence of more than a unilateral announcement of restriction by the wholesaler and voluntary adherence by the retailer. United States v. Bausch & Lomb Optical Co., 321 U.S. 707, 723, 64 S.Ct. 805, 813, 88 L.Ed. 1024 (1944). The presence of some "affirmative action to achieve uniform adherence by inducing each customer to adhere to avoid ... price competition ...," United States v. Parke, Davis & Co., 362 U.S. 29, 47, 80 S.Ct. 503, 513, 4 L.Ed.2d 505 (1960), is sufficient additional evidence. But to establish liability, direct evidence of an agreement need not be shown; it is permissible to reasonably infer the existence of a conspiracy from the defendant's conduct. United States v. Paramount Pictures, Inc., 334 U.S. 131, 142, 68 S.Ct. 915, 921, 92 L.Ed. 1260 (1948); Interstate Circuit, Inc. v. United States, 306 U.S. 208, 221, 59 S.Ct. 467, 472, 83 L.Ed. 610 (1939).

Within these limits, we are unable to conclude that Judge Grady's findings were clearly erroneous. The district court found on the basis of credible testimony that the defendants had received numerous complaints from plaintiff's retail competitors regarding the plaintiff's practice of discounting defendants' product lines, that the defendants agreed with the plaintiff's competitors to redress such complaints by seeking a curtailment of plaintiff's practices, and that when voluntary adherence was not forthcoming from the plaintiff, the defendants terminated plaintiff's supply of watches, with the express explanation that such termination was due to the plaintiff's putatively excessive discounting.

More specifically, the plaintiff's President, Donald Levinson, testified that Maurice Schilling, a sales representative of defendants, began in early 1974 to urge plaintiff to restrict its discounts in excess of 20% on the exclusive Piaget watch line. Schilling explained that his warning was a response to complaints from other retailers whose businesses could only support a 20% discount. Levinson was induced to sign a letter in September 1974, later repudiated, in which he agreed to reduce his discounts. When plaintiff resumed its discounting practices, Schilling again warned plaintiff in 1976 of complaints from plaintiff's competitors and hinted at termination if the discounting practices were not ended. When plaintiff refused to comply, defendants became uncooperative with plaintiff, refusing to supply immediate shipment of customer orders and ending delivery of watches on consignment.

In early 1978, according to the testimony of one of plaintiff's competitors, Schilling answered his complaints and plea for price "protection" with a commitment to "firm up the market." This competitor indicated to Schilling that he would not discount the company's line in excess of 20% if the defendants would enforce a no-discount policy against competing retailers; Schilling agreed to these terms. A similar promise to take the defendants' watch line out of the hands of excessive discounters was made by Schilling to another of Trabert & Hoeffer's competitors in response to complaints.

Levinson further testified that contemporaneously, he was unable to secure from the defendants either watches or an explanation of why his supply had been curtailed. After numerous unreturned telephone calls, Schilling finally told Levinson in June 1978 that his dealership had been eliminated because of pressure from plaintiff's competitors and Levinson's refusal to adhere to the 20% maximum discount. While contradictory testimony was offered by defendants' senior vice president as to the reasons for plaintiff's termination, the court found this testimony to be unreliable in view of the witness' unfamiliarity with the Trabert & Hoeffer dealership and his inability to provide a consistent counter-explanation for the termination. The court, as permitted under Interstate Circuit v. United States, 306 U.S. at 221, 59 S.Ct. at 472, also drew an adverse inference from Schilling's non-appearance at trial despite plaintiff's request that he testify. Noting the evidence of repeated and widespread complaints to the defendants by plaintiff's competitors and of Schilling's agreement to eliminate discounting, Schilling's warnings of termination if Trabert & Hoeffer continued its discounting, the subsequent noncooperation and termination of plaintiff unaccompanied by any credible business explanation, and Schilling's nonappearance at trial, the district court concluded that defendants' actions violated the Sherman Act's price-fixing prohibition.

The defendants seek reversal of the liability finding on the basis of several errors of law in Judge Grady's conclusions. First, appellants assert generally that under this court's decision in Lamb's Patio Theatre, Inc. v. Universal Film Exchanges, Inc., 582 F.2d 1068 (7th Cir. 1978) (per curiam), and under First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968), they have a right to sell to whomever they please and therefore a Sherman Act court is not permitted to infer a conspiracy from a unilateral termination which might have been undertaken for non-conspiratorial, even illegitimate, business reasons. Appellants err, however, in reading these cases too broadly. Lamb's Patio Theatre involved an allegedly conspiratorial refusal by a film distributor to accept the plaintiff's bid for a film showing; summary judgment was granted to defendant because plaintiff had failed to produce any evidence of a conspiracy apart from the weakness of the defendant's proffered explanation. In the present case, by contrast, the record contained a plethora of additional evidence probative of the existence of a conspiracy: Levinson's testimony as to Schilling's repeated warnings and his explanation of the termination, the testimony concerning the agreements between Schilling and Trabert & Hoeffer's competitors, and the furtive circumstances of the termination. In First National Bank of Arizona, 391 U.S. 253, 277, 88 S.Ct. 1575, 20 L.Ed.2d 569, the Supreme Court merely held any inference of conspiracy from the defendant's refusal to deal to be overcome by a more probable evidence-based inference of innocent motive. Here, the district court found the evidence insufficient to support such a countervailing inference. Instead, this case involves a history of explicit threats and agreements by the defendants to restrain price competition coupled with an unsatisfactorily explained refusal to deal. While the law recognizes that a manufacturer has a right to sell to whom it pleases, this court has held this right to be neither absolute nor exempt from regulation. "If it is accompanied by unlawful conduct or agreement, or conceived in monopolistic purpose or market control, the right is deemed to have transgressed the (Sherman) act." Fontana Aviation, Inc. v. Beech Aircraft Corp., 432 F.2d 1080, 1085 (7th Cir. 1970), cert. denied, 401 U.S. 923, 91 S.Ct. 872, 27 L.Ed.2d 826 (1971). ¹

The appellants next assert that because some further discounting in excess of 20% continued after the plaintiff's termination, the court...