Ryko Mfg. Co. v. Eden Services
| Decision Date | 18 August 1987 |
| Docket Number | Nos. 86-1312,86-1393,s. 86-1312 |
| Citation | 823 F.2d 1215,92 A.L.R.Fed. 387 |
| Parties | , 56 USLW 2066, 1987-1 Trade Cases 67,614 RYKO MANUFACTURING CO., Appellant, v. EDEN SERVICES, a Maryland Partnership, Fred J. Eden, Jr. and J. Erik Eden, Appellees. EDEN SERVICES, Fred J. Eden, Jr. and J. Erik Eden, Appellees, v. RYKO MANUFACTURING CO., Appellant. RYKO MANUFACTURING CO., Appellee, v. EDEN SERVICES, a Maryland Partnership, Fred J. Eden and J. Erik Eden, Appellants. EDEN SERVICES, Fred J. Eden, Jr. and J. Erik Eden, Appellants, v. RYKO MANUFACTURING CO., Appellee. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Donald J. Polden, Des Moines, Iowa, for appellant.
David O. Stewart, Washington, D.C., for appellees.
Before HEANEY, Circuit Judge, FLOYD R. GIBSON, Senior Circuit Judge, and BOWMAN, Circuit Judge.
Ryko Manufacturing Company (Ryko) appeals from the District Court's denial of its motions for directed verdict, judgment notwithstanding the verdict, and a new trial, following a jury trial of various claims stemming from a dispute with one of its distributors, Eden Services (Eden). Ryko initiated this lawsuit, seeking a declaratory judgment that Eden had breached the terms of its distributorship contract with Ryko. Eden counterclaimed, charging Ryko with federal antitrust and racketeering violations, breach of contract, and common law fraud. Eden later dropped its racketeering claim, but after a protracted trial, the jury returned verdicts for Eden on the antitrust, contract, and fraud claims. The jury awarded Eden damages only on the antitrust claims, which, when trebled, totalled approximately $1.1 million. Ryko challenges each of the verdicts, arguing that Eden has not produced evidence sufficient to support any of its claims. Alternatively, Ryko challenges the District Court's rulings on evidentiary matters pertaining to the computation of damages with respect to Eden's antitrust claims.
Ryko is a manufacturer of automatic car-wash equipment. Ryko markets its products nationally, both through a network of distributors and by direct sales to larger purchasers such as major oil companies arranging for the purchase of car-wash equipment for their affiliated stations. In the past Ryko has granted its distributors exclusive geographic territories and has prohibited the distributors from selling competitive car-wash equipment. Although the newer contracts contain less restrictive provisions, Eden's distributorship contract includes the earlier, more restrictive provisions. The distributors are responsible for promoting and soliciting sales of Ryko equipment and for performing installation, maintenance, and repair work on machines sold in their exclusive territories. In some areas, Ryko is a direct Sales of car-wash units are made in two ways, by sight draft and by purchase order. In sight-draft sales, the distributor takes an order for the equipment from the purchaser and forwards the purchase order to Ryko along with a downpayment on the machine. Ryko then builds the equipment as ordered, and ships the equipment to a location specified on the distributor's purchase order. Before the equipment is unloaded at its destination, Ryko requires confirmation that the distributor's sight draft, which guarantees payment for the equipment, has been honored. In all material respects, these sales are thus the equivalent of cash transactions. Ryko provides its distributors with suggested retail prices for its equipment, but the distributors are free to charge whatever the market will bear when selling by sight draft to independent buyers unaffiliated with any of the major oil companies or other major buyers.
distributor and subcontracts the installation, maintenance, and repair work.
For sales by purchase order, Ryko requires no downpayment. The customer issues a purchase order in its own name payable directly to Ryko, and this documentation is intended to exclude the distributor as an intermediate payor or payee. Ryko then ships the equipment to the customer and arranges for its installation by a distributor, without requiring immediate payment.
Sales to larger customers generally are made by purchase order through Ryko's National Account Program (NAP). Under the NAP, designated customers, most commonly major oil companies and other multiple purchasers of car-wash equipment, receive significant volume discounts from the prices that Ryko recommends its distributors charge on individual sales for the distributor's own account. Ryko's contracts with its distributors specify that Ryko retains sole control over pricing and other marketing decisions regarding the NAP.
Although the qualifications for NAP customer status are not entirely clear, Ryko appears to focus its NAP program on those customers who are likely to purchase a large number of car-wash machines and whose buying decisions are handled, at least initially, in some centralized manner. For example, the oil companies generally participate in the purchase of car-wash equipment by their affiliated service stations. In many cases, prior approval of the equipment by the oil company is necessary because the oil company is assisting the station owner or jobber with financing for the machines. Even where financial assistance from the oil company is not required, lease obligations or other contractual arrangements may require such approval before installation of equipment at a particular service station. Accordingly, very few of the individual station operators or jobbers affiliated with the major oil companies are likely to purchase equipment unless it first has been approved by central management. The oil companies naturally seek to use their potential for purchasing large quantities of machines, even if purchased one at a time, to demand the best possible prices and service arrangements from their equipment suppliers. Moreover, the oil companies generally expect to receive a single discounted price for equipment to be installed at any company location throughout the country. Joint Appendix (J.A.) 359; Trial Exhibits (Ex.) 23, 72, 81, 83, 87, 88, B-2, I-3.
In many respects, sales by the distributors and NAP sales are identical. The distributor often is involved in the NAP sale and frequently is responsible for promotion, planning, installation, and servicing of equipment sold to NAP customers. However, Ryko corporate sales personnel are involved to a greater degree in NAP sales than in the distributors' sales to non-NAP customers. Ryko makes sales presentations to oil company procurement personnel, arranges for installatior of Ryko equipment on a trial-use basis, and negotiates volume discounts with the customers in an effort to receive the required oil company approvals for its equipment. Ryko's factory representatives maintain continuing contact with the NAP customers' national or regional headquarters, further promoting the products and monitoring Although some companies issue orders for multiple machines based on these national presentations, the distributors' promotional efforts can be essential to the completion of individual NAP sales. The distributors make primary contact with (1) individual station owners affiliated with the major oil companies; (2) oil industry middlemen, known as "jobbers," who typically own a number of affiliated stations; and (3) middle level or district managers of the oil companies with direct responsibility for retailing operations within the distributors' areas. While an oil company might designate Ryko an approved equipment supplier as the result of a national sales presentation, many NAP sales cannot be completed until the distributor has convinced the local purchaser that installing Ryko car-wash equipment at his location is a profitable idea.
customer satisfaction with the equipment and services.
Nevertheless, there are important differences between NAP sales and other sales by the distributors. First, as noted above, the prices at which NAP sales are made are set by Ryko. In making a sales presentation under the NAP, the distributor is obliged to offer equipment at the NAP price. Sales by the distributors for their own accounts are not similarly restricted. Second, the method of payment differs. In the case of NAP sales, Ryko extends credit to the customer, shipping and arranging for installation of the goods solely on the basis of the customer's purchase order. On other sales, Ryko requires its distributors to issue sight drafts guaranteeing immediate payment for the machines. Third, the method of compensating the distributors differs. On sight-draft sales, the distributor receives payment directly from the customer, and earns a gross profit equal to the difference between the retail price he charges the customer and the wholesale price Ryko charges the distributor for the machine. On NAP sales, Ryko pays the distributors a commission for each machine sold in the distributor's exclusive territory. The commission on NAP sales is the difference between the NAP price to the customer and the wholesale price the distributor would have paid if purchasing the machine for its own account. Finally, the documentation for the transactions differs. The same purchase order forms, which bear Ryko's logo and billing address, are used in both sight-draft and NAP sales. However, the distributors are required by their contracts with Ryko to issue purchase orders for NAP sales in the name of the NAP customer; on sales for the distributor's own account, the orders are issued in the distributor's name.
Eden became a Ryko distributor in the summer of 1977 and was assigned in the distributorship contract an exclusive territory covering Maryland and the District of Columbia. Ryko recently had assigned all of Virginia to another distributor, but Eden repeatedly expressed a desire to distribute Ryko's products in...
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