Fargo Glass & Paint Co. v. Globe American Corp.

• Decision Date: 04 February 1953
• Docket Number: No. 10549.,10549.
• Parties: FARGO GLASS & PAINT CO. v. GLOBE AMERICAN CORP.
• Court: U.S. Court of Appeals — Seventh Circuit

201 F.2d 534 (1953)

FARGO GLASS & PAINT CO. v. GLOBE AMERICAN CORP.

No. 10549.

United States Court of Appeals, Seventh Circuit

February 4, 1953.

Earl B. Barnes, Hubert Hickam, Alan W. Boyd and Louis A. Highmark, Indianapolis, Ind., Ralph L. Read, Des Moines, Iowa (Winston, Strawn, Black & Towner, Chicago, Ill., Barnes, Hickam, Pantzer & Boyd, Indianapolis, Ind., of counsel), George B. Christensen and Edward J. Wendrow, Chicago, Ill., for appellant.

Bernard N. Buchholz, Harry G. Fins and Edward Atlas, Chicago, Ill., for appellee.

Before KERNER, FINNEGAN and SWAIM, Circuit Judges.

FINNEGAN, Circuit Judge.

We considered and disposed of a prior appeal in this case on May 6, 1947, 161 F. 2d 811.

It then appeared that the original complaint of Fargo Glass & Paint Company, which sought to recover damages for cancellation by the defendant Globe American Corporation of a written contract with plaintiff, was dismissed by order of the District Court on defendant's motion. The written contract on which said complaint was based provided that Fargo was to buy from Globe for resale, within certain restricted territory, gas ranges manufactured by Globe and known to the trade under the name "Dutch Oven." We there reversed the judgment of the District Court and remanded the cause with directions to vacate the order of dismissal, to overrule Globe's motion to dismiss, and for further proceedings.

After remand the plaintiff, in this appeal the appellee, and hereinafter referred to as Fargo, filed an amended complaint containing seven counts and adding The Maytag Corporation as an additional defendant.

Counts one to four inclusive of the amended complaint alleged in substance that by entering into an agreement under which Globe agreed to sell its entire output of gas ranges to The Maytag Company for resale by the latter, and under which Maytag agreed to purchase its requirements of gas ranges from Globe, and in order to perform such contract Globe cancelled its prior tentative contract with distributors including Fargo, defendants violated sections 1 and 2 of the Sherman Act, 15 U.S.C.A. §§ 1, 2. It is also charged that The Maytag Company purchased and acquired 40% of the common stock of Globe, and in so doing violated section 7 of the Clayton Act, 15 U.S.C.A. § 18.

The fifth count sought to recover from Globe alone damages for the alleged breach of the contract declared upon in the original complaint. The sixth count sought to recover from the added defendant, Maytag, alone damages for alleged wrongful interference with said original Globe-Fargo contract. The seventh count sought to recover from the defendant Globe alone expenditures alleged to have been made in performing the contract originally declared upon and sought also profits that would have been realized thereunder. Issue was joined on all counts, and the case was tried by the District Court without the intervention of a jury.

At the conclusion of the trial the District judge pointed out that there was no evidence to support counts five, six and seven and the plaintiff Fargo, through its attorney, waived all right of recovery on said counts. The trial court filed its findings of fact and conclusions of law on counts one to four inclusive, and entered judgment against the defendants, Globe American Corporation, and The Maytag Company, for $148,976.48. To reverse that judgment this appeal is prosecuted.

The appellants, Globe and Maytag, now contend: (1) that the arrangement between Globe and Maytag for the sale to the latter of Globe's entire output of gas ranges did not violate section 2 of the Sherman Act; (2) that the acquisition by Maytag of 40% of the common stock of Globe did not violate section 7 of the Clayton Act; and (3) that the measure of damages applied by the District Court was erroneous.

The appellee, Fargo, urges that the agreements and acts of the defendants constitute a conspiracy under section 1 of the Sherman Act and are violative thereof. It also contends that the acquisition by Maytag of 40% of the common stock of Globe violated section 7 of the Clayton Act.

A brief statement of the facts disclosed by the record will be of aid in the consideration of the contentions of the respective parties. Since the evidence material to the issues involved consists mainly of documents, depositions, answers to interrogatories and requests for admissions and oral testimony, which is almost entirely uncontroverted, the findings of fact entered by the District Court are not absolutely binding on this court. Murray v. Noblesville Milling Co., 7 Cir., 131 F.2d 470; Carter Oil Co. v. McQuigg, 7 Cir., 112 F.2d 275; Himmel Bros. Co. v. Serrick Corporation, 7 Cir., 122 F.2d 740.

It appears that the plaintiff-appellee, Fargo, is and was, at all relevant times, engaged in the business of buying and selling home appliances at wholesale. The defendant, Globe, was a manufacturer. It operated one plant at Macomb, Illinois, where it manufactured various types of agricultural equipment. A second plant was operated by Globe at Kokomo, Indiana, where it manufactured various types of stoves and ranges, including a gas range known to the trade as "Dutch Oven."

In 1940, Globe manufactured and sold between 7,000 and 8,000 gas ranges which was less than one percent of the total of such ranges sold in the United States. From 1942 to 1945, Globe was engaged in war work manufacturing life boats and other equipment for the Government. Late in 1944, and in the beginning of 1945, it began preparations to re-engage in the manufacture of gas ranges. It entered into tentative agreements with a number of wholesalers and some large retail dealers, including Fargo. Each of such tentative agreements stated that its object was to define certain territorial limits in which the named distributor or dealer was to sell, and to outline certain agreements pending the execution of a formal contract covering terms, payments, guarantees, and other subjects. Each such agreement, including that entered into with Fargo, dated July 26, 1945, provided:

"It is mutually agreed that this is a statement of intention based on good faith between the Company and the Distributor and shall be cancelled either/or when superseded by formal contract covering all phases of the transaction or by either party giving written notice of such intention."

In June, 1945, long prior to any post-war production of gas ranges, certain of its stockholders were opposed to the re-entry by Globe into the gas range business. The head of the opposition group was chairman of Globe's Board of Directors, W. D. Harvey, who was the largest stockholder, owning with his wife approximately 30% of the outstanding stock. The remainder of the group, which joined in Harvey's dissent, owned about 10% of the capital stock. The 60% of the capital stock remaining was in the hands of holders who were content to re-engage in the manufacture of gas ranges. Due to this conflict of opinion, it appears that in July, 1945, it was decided to attempt to sell, or otherwise liquidate, either or both the Macomb and Kokomo divisions.

In the latter part of July, 1945, an industrial broker suggested The Maytag Company as a possible purchaser, and brought representatives of Globe and Maytag together. After discussion and consideration, The Maytag Company was unwilling to purchase either Globe plant but was interested in any arrangement which would give it a satisfactory source of supply of gas ranges, and if such arrangement could be made Maytag was willing to purchase the Globe stock from its dissenting stock-holders so that the manufacture of gas ranges might go forward.

Maytag did not desire to market a range under its own name, which was identical with a product being sold under another name, and it did not believe that Globe had the capacity to supply its requirements and at the same time manufacture gas ranges of a different type for their customers. As a matter of fact, Globe has never been able to supply Maytag with the number of ranges ordered except during the first six months of 1949 when there was a general depression in the sale of appliances. Globe was willing to enter into such an agreement because it would solve the problem which was preventing it from re-engaging in the gas range manufacturing business, and because it would furnish an assured outlet for its product if Maytag would agree to purchase all its requirements from Globe. Globe desired such provision because under the arrangement it would perhaps lose its identity as a manufacturer and be obliged to rely entirely on Maytag as a market.

Maytag was advised in the course of the negotiations concerning the tentative distributor and dealer agreements previously entered into by Globe, but was advised both by Globe and by its own counsel that since such agreements could be cancelled by Globe, they would not prevent the proposed arrangement from being made and carried out. As a result of these negotiations on September 19, 1945, Maytag purchased the stock of the Harvey group at book value in September, 1945, and concurrently an agreement was entered into between Maytag and Globe which extended to November 30, 1948, and was to continue thereafter until terminated by either party giving a twelve months' written notice. This agreement provided for the sale of Globe's entire output of gas and electric ranges, and repair parts therefor, to Maytag, and the purchase by Maytag from Globe of its requirements of such products for distribution and sale.

Globe then cancelled its tentative agreements with the distributors and dealers, including the agreement with Fargo by written notice. Globe has since manufactured gas ranges only for The Maytag Company, and Maytag has purchased its gas range requirements from Globe.

Globe is one of approximately seventy manufacturers of standard gas ranges in the United States. Prior to the war it had produced only a relatively small number of gas ranges. It...