Spray-Rite Service Corp. v. Monsanto Co.

• Citation: 684 F.2d 1226
• Decision Date: 08 September 1982
• Docket Number: Nos. 80-1621,SPRAY-RITE,80-2233 and 80-2624,80-2232,s. 80-1621
• Parties: 1982-2 Trade Cases 64,808, 11 Fed. R. Evid. Serv. 226 SERVICE CORPORATION, an Iowa corporation, Plaintiff-Appellee, v. MONSANTO COMPANY, a Delaware Corporation, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 1226

684 F.2d 1226

1982-2 Trade Cases 64,808, 11 Fed. R. Evid. Serv. 226

SPRAY-RITE SERVICE CORPORATION, an Iowa corporation, Plaintiff-Appellee, v. MONSANTO COMPANY, a Delaware Corporation, Defendant-Appellant.

Nos. 80-1621, 80-2232, 80-2233 and 80-2624.

United States Court of Appeals, Seventh Circuit.

Argued May 15, 1981.

Decided June 28, 1982.

Rehearing and Rehearing En Banc Denied Sept. 8, 1982.

James I. Rubin, Butler & Rubin, Ltd., Robert G. Foster, Winston & Strawn, Chicago, Ill., for plaintiff-appellee/cross-appellant.

Fred H. Bartlit, Jr., Kirkland & Ellis, Chicago, Ill., for defendant-appellant/cross-appellee.

Before BAUER, Circuit Judge, NICHOLS, Associate Judge, ^* and WOOD, Circuit Judge.

BAUER, Circuit Judge.

Spray-Rite Service Corporation ("Spray-Rite") brought this antitrust action against Monsanto Company alleging that Monsanto combined and conspired with some of its distributors to fix the resale price of Monsanto herbicides in violation of section 1 of the Sherman Act, 15 U.S.C. § 1. Spray-Rite's cause of action was tried to a jury before the Honorable Stanley J. Roszkowski. On February 21, 1980, the jury returned a verdict against Monsanto and awarded Spray-Rite $3,500,000. The district court trebled the verdict pursuant to 15 U.S.C. § 15. The Clerk of the District Court entered judgment the following day of "$10,500,000.00 plus interest at the legal rate." On March 11, 1980, Spray-Rite moved to amend the judgment to assess costs and attorneys' fees. The court granted Spray-Rite's motion on March 21, 1980.

The four separate appeals from the judgment below have been consolidated in this court. Monsanto appeals in 80-1621 from the order granting Spray-Rite's motion to amend the judgment to assess costs and attorneys' fees, and it appeals in 80-2232 from the verdict against it. Monsanto appeals in 80-2624 from the order awarding Spray-Rite $895.747.80 in attorneys' fees. Spray-Rite cross-appeals in 80-2233 from the original judgment to the extent that it failed to assess costs and attorneys' fees. We affirm the amended judgment against Monsanto, dismiss Spray-Rite's cross-appeal, and affirm in part and reverse and remand in part the award of $895,747.80 in attorneys' fees.

FACTS

Spray-Rite was engaged in the wholesale agricultural chemical distribution business from 1957 to 1972. Donald Yapp, Spray-Rite's owner and president, was the company's sole salaried salesman. Spray-Rite bought insecticides and herbicides from competing manufacturers, including Monsanto, and resold products to dealers and farmers.

Between 1957 and 1968, Monsanto manufactured two herbicides: Randox and Ramrod; it introduced a third product, Lasso, in 1968. Monsanto markets its herbicides primarily through independent, non-exclusive distributors. Monsanto assigns each distributor a geographic area of primary responsibility, but the distributors may sell outside that area. Approximately ten to twenty distributors are assigned to each area.

Monsanto sent a letter to each of its distributors in 1967 announcing that it would immediately appoint distributors for one year terms expiring automatically unless renewed by Monsanto. The letter described Monsanto's newly adopted criteria for evaluating distributor performance: (1) whether the distributor's primary activity was soliciting sales to herbicide dealers; (2) whether the distributor employed trained personnel capable of carrying out Monsanto's technical programs with dealers and farmers; ¹ and (3) whether the distributor was fully exploiting the herbicide market in its area of primary responsibility. Yapp received the letter describing the evaluation criteria along with his one-year distributorship contract for 1967-68.

Monsanto notified Spray-Rite in 1968 that it would not renew Spray-Rite's distributorship. Of Monsanto's approximately 100 distributors, Spray-Rite was its tenth largest Ramrod distributor. Ninety percent of Spray-Rite's sales volume was devoted to herbicide sales, 16% of its sales were of Monsanto products, and 18% of its profits were derived from its Monsanto sales during the 1967-68 season.

Monsanto made several changes in its herbicide business after the 1967-68 season. In addition to introducing Lasso, Monsanto reduced the distributor and suggested resale prices of Ramrod and changed the suggested distributor profit margin from 11% to approximately 7%. Monsanto also adopted new shipping and pick-up policies. It made free deliveries to the Monsanto warehouse within the distributor's area of primary responsibility, but the distributor had to assume the additional shipping costs if it resold the products outside its primary area. Monsanto's new compensation programs included cash bonus payments to distributors for participating in Monsanto's technical schools and demonstrations. Monsanto expanded the compensation programs in 1970 and 1972 to include distributor price discounts on herbicides resold to dealers who had attended Monsanto's technical programs. Monsanto also gave price discounts, which were rebated to the distributor at the end of the season, on orders purchased early in the season.

Spray-Rite attempted to purchase Monsanto herbicides from other distributors after its distributorship was terminated. ² It was unable to purchase any Lasso at all during the 1968-69 season. It did obtain some Ramrod, but not so much as it desired or so early in the season as it needed. Spray-Rite went out of business in 1972. It contends that Monsanto's unlawful business practices drove it out of business.

Spray-Rite claims that Monsanto and some of its distributors conspired to fix the resale price of Monsanto herbicides. Spray-Rite contends that Monsanto terminated Spray-Rite's distributorship, adopted compensation programs and shipping policies, and encouraged distributors to boycott Spray-Rite in furtherance of this conspiracy.

The district court instructed the jury that it should find Monsanto's conduct per se unlawful if it found that Monsanto engaged in the alleged conduct in furtherance of a conspiracy to fix resale prices. The court also gave the jury three special interrogatories.

1. Was the decision by Monsanto not to offer a new contract to plaintiff for 1969 made by Monsanto pursuant to a conspiracy or combination with one or more of its distributors to fix, maintain or stabilize resale prices of Monsanto herbicides?

2. Were the compensation programs and/or areas of primary responsibility, and/or shipping policy created by Monsanto pursuant to a conspiracy to fix, maintain or stabilize resale prices on Monsanto herbicides?

3. Did Monsanto conspire or combine with one or more of its distributors so that one or more of those distributors would limit plaintiff's access to Monsanto herbicides after 1968?

The jury responded "yes" to each interrogatory and returned a general verdict against Monsanto awarding Spray-Rite $3,500,000 in damages.

No. 80-2232: Monsanto's appeal from the verdict.

Monsanto argues three separate grounds for reversal. First, it asserts that the jury charge contained material misstatements of the law governing the issues in this case. Second, Monsanto contends that there is insufficient evidence to support the verdict. Third, Monsanto argues that the district court made several erroneous evidentiary rulings. We find none of Monsanto's arguments persuasive, and, accordingly, we affirm the judgment of the district court.

I. The Jury Charge

We must consider alleged errors in jury instructions in light of the adequacy of the charge as a whole. Alloy International Co. v. Hoover-NSK Bearing Co., 635 F.2d 1222, 1226 (7th Cir. 1980). The district court instructed the jury generally concerning Spray-Rite's theory of the case. It also instructed the jury that Spray-Rite bore the burden of proof, including the burden of proving the existence of a conspiracy to fix the resale price of Monsanto herbicides. The instructions defined "conspiracy" and explained that some types of restraints are per se unlawful. The court then instructed the jury concerning termination of distributorships, boycotts, and the use of vertical restrictions. After carefully reviewing the entire jury charge, we are convinced that the instructions in this case were proper.

A. Termination of the Spray-Rite Distributorship

The court instructed the jury that a manufacturer has the right to select its distributors and set a suggested resale price for its products. The instructions explained that this right is limited, however, because the manufacturer may not coerce distributors to follow its suggested price by threatening to terminate their distributorships. The court then instructed the jury that "(i)f the manufacturer's selection (of a distributor) is accompanied by unlawful purpose, conduct or agreement, it violates the Sherman Act." Tr. at 4363 (emphasis added). Monsanto contends that these instructions gave the jury the incorrect impression that a manufacturer that unilaterally decides to terminate a distributor violates the Sherman Act if the manufacturer had an improper motive.

A manufacturer may unilaterally fix a suggested resale price for its product. United States v. Colgate, 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992 (1919). It may also lawfully refuse to deal with any distributor that resells the product at a price other than that it has suggested. Id. If, however, the manufacturer does anything more than merely announce the suggested resale price and then refuse to deal with distributors that fail to comply with that price, the manufacturer is engaged in a per se unlawful resale price maintenance scheme. United States v. Parke, Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 (1960); United States v. Bausch & Lomb Co., 321 U.S. 707, 64 S.Ct. 805, 88 L.Ed. 1024 (1944); FTC v. Beech-Nut Co., 257 U.S. 441, 42 S.Ct. 150, 66 L.Ed. 307 (1922). An unlawful resale price maintenance scheme can be effected in either of two ways: the...