Alloy Intern. Co. v. Hoover-NSK Bearing Co., Inc.

Citation635 F.2d 1222
Decision Date12 March 1980
Docket NumberNo. 78-2137,HOOVER-NSK,78-2137
Parties1980-1 Trade Cases 63,148 ALLOY INTERNATIONAL CO., a corporation, Plaintiff-Appellant, v.BEARING COMPANY, INC., a corporation, and Hoover Ball & Bearing Company, a corporation, Defendant-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

Before PELL, Circuit Judge, VAN DUSEN, Senior Circuit Judge, * and TONE, Circuit Judge.

TONE, Circuit Judge.

The evidence in this treble-damage action under § 1 of the Sherman Act, 15 U.S.C. § 1, would have permitted the jury to find that the defendant manufacturer refused to sell to the plaintiff distributor as a result of an agreement with the latter's competitor aimed at eliminating price competition between the distributors. The jury, however, returned a general verdict in favor of the defendant manufacturer. The principal issues presented by the parties are, first, whether such a refusal to sell would have been a per se violation of § 1, and, second, if so, whether the jury was adequately instructed to that effect. We accept plaintiff's view of the substantive law, but hold that the jury was adequately informed on that subject; we therefore affirm the judgment.

Only one claim is before us: 1 Plaintiff Alloy International Company, a distributor of bearings, alleges that defendant Hoover Ball & Bearing Company, 2 a manufacturer of bearings, refused to continue selling bearings to Alloy pursuant to the request of another Hoover distributor, Dodge & Seymour, Inc., 3 a competitor of Alloy. Both the request and the refusal are alleged to have been for the purpose of eliminating price competition between Dodge & Seymour and Alloy in the resale of Hoover bearings. Alloy contends that the conduct of Hoover and Dodge & Seymour constituted a conspiracy to restrain price competition that was a per se violation of § 1 of the Sherman Act, 15 U.S.C. § 1.

The Facts

Although the record is long, the essential facts may be stated briefly. Hoover sold bearings for export to Dodge & Seymour, for many years pursuant to an exclusive contract and later under a less formal relationship. Shortly before and after the termination of the exclusive contract, Hoover accepted and filled several orders from Alloy for bearings to be exported. Alloy concentrated its efforts to resell Hoover bearings in Southeast Asia, where Dodge & Seymour also sold.

Alloy's prices in Southeast Asia were lower than those of Dodge & Seymour. This led to complaints by Dodge & Seymour to Hoover that Alloy was "price cutting." Hoover, although it neither suggested nor knew the prices at which its bearings were resold in Southeast Asia, disliked price cutting. Also, Hoover desired to raise its own prices and recognized that its ability to do so might well be influenced by the prices at which the bearings were resold abroad. Ultimately, Hoover refused to continue selling to Alloy.

The jury could properly have found either that, as Alloy contended, Hoover ceased selling to Alloy pursuant to an understanding with Dodge & Seymour entered into for the purpose of eliminating price competition between the two distributors, or that, as Hoover contended, it independently decided to cease selling to Alloy and, moreover, so decided for reasons other than the price cutting.

I.

In challenging the judgment on the verdict, Alloy argues that if the refusal to sell was the result of an agreement between its competitor and Hoover to eliminate Alloy's price competition in Southeast Asia, the refusal was a per se violation of § 1 of the Sherman Act, and, further, that the trial court, when it refused a proper issue instruction to that effect tendered by plaintiff, failed adequately to instruct the jury. Hoover responds that its refusal to deal with Alloy, even if so motivated, was not a per se violation but must be tested by the rule of reason; concededly, plaintiff did not offer evidence that would have supported a determination in its favor if the rule of reason had applied. Alternatively, Hoover argues that, even if the law is as Alloy contends, the jury was adequately instructed despite the refusal of Alloy's issue instruction. 4

Because we conclude, as explained below, that the jury was adequately instructed in accordance with plaintiff's per se theory, the fact that the jury nevertheless decided against plaintiff makes it possible for us to decide the case without deciding whether that theory is legally correct. Yet the orderly approach to deciding the case was to consider the substantive issue first. This was so not merely because the parties had argued the case in that sequence, but also because a resolution of the substantive legal issue in defendants' favor would have made it unnecessary to go on to consider the adequacy of the instructions, a task which required extensive examination of the record. Now, having proceeded in that sequence, and having accordingly formed an opinion on the substantive antitrust issue, it seems appropriate to express that opinion in order to report accurately the process by which we have reached our decision. 5

The antitrust issue was recently decided by the Third Circuit in Cernuto, Inc. v. United Cabinet Corp., 595 F.2d 164 (3d Cir. 1979), in which the court stated its holding as follows:

If Cernuto (the terminated distributor) can prove at trial that United (the manufacturer), Lappin (United's sales representative) and Famous (Cernuto's competitor) conspired to protect Famous from price competition by Cernuto, and that United and Lappin terminated Cernuto at Famous' request and in pursuit of a price related end, then it can prevail on a price-fixing theory notwithstanding its failure to show any impact on competition ....

Id. at 170. This was so even though the alleged conspirators "did not set prices at an exact level." Id. at 168-69. For, said Judge Adams for the court If the purpose and effect of the challenged conduct is to restrain price movement and the free play of market forces, it is then illegal per se.

Id. at 169.

We believe that the Cernuto case was correctly decided and are in essential agreement with the reasoning of the opinion in that case. 6 For us, Hoover's arguments that the law is otherwise are sufficiently answered by that opinion. Accordingly, our premise in considering the instructions issue is that the verdict can stand only if the jury understood that, if they found Hoover refused to sell bearings to Alloy pursuant to an agreement entered into for the purpose of restricting price competition between Dodge & Seymour and Alloy, Hoover would be liable under § 1 of the Sherman Act.

II.

We turn to the issue of whether the jury was adequately instructed. Usually, the jury is advised of the applicable substantive law and the ultimate issues it must decide in applying that law to the facts by an issues instruction specifying the elements of the plaintiff's claim and stating that, in order to prevail, the plaintiff has the burden of proving each of these elements.

Alloy tendered an instruction of this kind, which was refused by the judge, and thereafter repeatedly revised, retendered, and still refused. We believe the final version was a correct statement of the law as we have declared it. As such it should have been given, 7 for a party is entitled to have the jury instructed on his theory of the case. Opening statements or closing arguments of counsel are not to be relied upon as a substitute for proper jury instructions.

Nevertheless, an error in refusing to give an instruction, like any other trial error, is subject to Rule 61, Fed.R.Civ.P. If it "does not affect the substantial rights of the parties," we are to disregard it.

To apply this test to a failure to give a proper instruction, we determine whether the jury was sufficiently informed, by the instructions the court did give and by other means, of the issues and its duty to decide them. Alleged errors in jury instructions are considered in the light, not only of the instructions as a whole, but of the allegations of the complaint, the opening statements, the evidence, and the closing arguments. Beard v. Mitchell, 604 F.2d 485, 497-98 (7th Cir. 1979); Musgrave v. Union Carbide Corp., 493 F.2d 224, 231 (7th Cir. 1974); see Coughlin v. Capitol Cement Co., 571 F.2d 290, 300 (5th Cir. 1978) (Tuttle, J.). We consider all that the jury heard and, "from the standpoint of the jury," Troutman v. Southern Ry., 441 F.2d 586, 590 (5th Cir.) (Wisdom, J.), cert. denied, 404 U.S. 871, 92 S.Ct. 81, 30 L.Ed.2d 115 (1971), decide "not whether the charge was faultless in every particular but whether the jury was misled in any way and whether it had understanding of the issues and its duty to determine those issues." Borel v. Fibreboard Paper Products Corp., 493 F.2d 1076, 1100 (5th Cir. 1973) (Wisdom, J.), cert. denied, 419 U.S. 869, 95 S.Ct. 127, 42 L.Ed.2d 107 (1974). Thus, in the recent Beard case, supra, even though the trial court rejected proper, specific instructions tendered by the plaintiff and instead used others that were "not entirely explicit," we nevertheless refused to reverse a judgment on the verdict for defendant, stating,

Counsel's statements in open court, colloquies with the judge, opening and closing arguments and hours of witness testimony on the topic fully exposed the jury to plaintiff's theories. Unless there is substantial reason to believe that the jury did not recognize that it was entitled to find liability on the basis of certain facts in evidence we would be extremely reluctant to reverse.

Beard v. Mitchell, supra, 604 F.2d at 498.

In the case at bar the record, considered as a whole, shows that the jury was adequately informed of the disputed controlling issue and the applicable law. That issue was, why did Hoover stop selling to Alloy? That issue and the fact that it was controlling were made clear in opening statements,...

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