Schoenkopf v. Brown & Williamson Tobacco Corp.

• Decision Date: 18 January 1980
• Docket Number: Civ. A. No. 78-1592.
• Citation: 483 F. Supp. 1185
• Parties: Richard SCHOENKOPF, d/b/a "Vend-Mark" v. BROWN & WILLIAMSON TOBACCO CORPORATION, Loew's Theatres, Inc., R. J. Reynolds Tobacco Company.
• Court: U.S. District Court — Eastern District of Pennsylvania

483 F. Supp. 1185

Richard SCHOENKOPF, d/b/a "Vend-Mark" v. BROWN & WILLIAMSON TOBACCO CORPORATION, Loew's Theatres, Inc., R. J. Reynolds Tobacco Company.

Civ. A. No. 78-1592.

United States District Court, E. D. Pennsylvania.

January 18, 1980.

COPYRIGHT MATERIAL OMITTED

Arnold Levin, Michael Fishbein, Adler, Barish, Daniels, Levin & Creskoff, Philadelphia, Pa., for plaintiff.

John Harkins, Jr., Marjorie Marinoff, Richard Bernstein, Pepper, Hamilton & Scheetz, Philadelphia, Pa., for R. J. Reynolds Tobacco Co.

Franklin Poul, Diane Sigmund, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa., for Loew's Theatres, Inc.

Charles Hileman, III, Peter Greenberg, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for Brown & Williamson Tobacco Corp.

MEMORANDUM

RAYMOND J. BRODERICK, District Judge.

The plaintiff, Richard Schoenkopf, brought this action against R. J. Reynolds Tobacco Company (RJR), Brown & Williamson Tobacco Corporation (B&W), and Loew's Theatres, Inc. (Lorillard) for alleged violations of the Sherman Act, the Robinson-Patman Act, and for alleged breaches of contracts which the plaintiff allegedly entered with each of the three defendants. The plaintiff has sought treble damages for the alleged Sherman Act violations, damages for his contractual claims, and injunctive relief under the Robinson-Patman Act.

The plaintiff alleged that: (1) the defendants conspired to refuse to deal with the plaintiff, in violation of section 1 of the Sherman Act, 15 U.S.C. § 1 (1976); (2) the defendants violated section 2(d) of the Robinson-Patman Act, 15 U.S.C. § 13(d) (1976), by failing to make the promotional allowances they offer to the operators of cigarette vending machines available to all operators of cigarette vending machines; and (3) each defendant breached its contract with the plaintiff. The case was tried before a jury from October 11, 1979 to October 23, 1979, and at the end of the plaintiff's case, the defendants filed Rule 50 motions for a directed verdict on the plaintiff's Sherman Act claims. After hearing argument thereon, the Court directed a verdict for all defendants on the Sherman Act claims. By agreement of the parties, the jury was discharged and it was stipulated that the Court should decide the plaintiff's Robinson-Patman and contractual claims on the basis of the testimony presented to the jury, together with other facts stipulated by the parties.

I. The Sherman Act Claims

The six major tobacco companies, American, Philip Morris, Liggett & Myers, RJR, B&W, and Lorillard, each market many different brands of cigarettes. One marketing technique employed by all of these companies is the sale of their brands of cigarettes to operators of cigarette vending machines. The number of different brands marketed by these companies, however, greatly exceeds the number of columns in a cigarette vending machine. To encourage vending machine operators to display and sell their brands of cigarettes, each of the six major tobacco companies offers a promotional allowance to the vending machine operators for placing various combinations of their brands in the columns of a machine. These allowances range from approximately $1.50 per year to approximately $15.00 per year, depending upon the type and/or number of brands placed in the machine.

Many vending machine operators have no knowledge of these promotional allowances, however, because they are not in direct contact with the tobacco companies and do not read the trade journals in which these allowances are advertised. These operators typically own only one or two vending machines, and locate them at their places of business, which are usually gas stations, stores, or restaurants. The operators of a large number of vending machines take advantage of these promotional allowances much more frequently than the small operators.

The plaintiff, in the middle of 1976, started a company known as "Vend-Mark". The purpose of Vend-Mark was to act as an independent reporting agent for people who operated only a few vending machines and wished to participate in the promotional allowance programs offered by the tobacco companies. The plaintiff entered into agreements with each of the six major tobacco companies that basically provided that Vend-Mark would submit a promotional allowance report to the company at the end of each quarter which covered all of the machines of operators for whom the plaintiff was the reporting agent. The tobacco companies paid Vend-Mark directly for these reports, and the plaintiff, pursuant to the arrangements he had made with the small operators, remitted fifty percent of the payment covering their particular machine or machines to them.

Vend-Mark was successful and grew rapidly. By the end of the third quarter of 1977, Vend-Mark was reporting for 3,496 machines, and there were 5,520 machines for which Vend-Mark was reporting at the end of the first quarter of 1978. At the time of trial, Vend-Mark was reporting for approximately 4,200 machines.

In December of 1977, however, B&W notified the plaintiff that B&W offered participation in vending machine display plans only to those people who actually owned or operated the vending machines. A clause to this effect was contained in the agreement between B&W and the plaintiff, and B&W therefore terminated its agreement with the plaintiff. B&W and the plaintiff attempted to negotiate an alternative arrangement that would be satisfactory to both parties, but none could be reached. On March 6, 1978, B&W finally terminated all negotiations with the plaintiff.

Lorillard also terminated its reporting agreement with the plaintiff on March 31, 1978. Its primary reason for terminating the plaintiff was a failure of performance by the plaintiff in its submission of reports regarding the placement of Lorillard products. In addition, RJR terminated its reporting agreement with the plaintiff on May 1, 1978, due to a determination on the part of RJR that it was more advantageous to RJR to have its own personnel contact the individual cigarette vending machine operators and pay the promotional allowances directly to the operators in cash when its salesmen made calls on the operators.

The plaintiff claims that the defendants conspired to refuse to deal with him, in violation of section 1 of the Sherman Act. At the end of the plaintiff's case, however, the Court concluded that there was insufficient evidence from which a jury could reasonably find the existence of a conspiracy among the defendants to terminate the plaintiff, and accordingly directed a verdict for the defendants on the plaintiff's Sherman Act claims. In granting the directed verdict, we have given the plaintiff the benefit of every inference that could be drawn from the evidence he presented. Furthermore, the Court did not weigh the credibility of any witness in arriving at its decision to grant the defendants' Rule 50 motions.

An examination of the testimony in this case reveals conduct on the part of the three defendants which could be considered parallel conduct. B&W terminated the plaintiff on March 6, 1978, Lorillard terminated the plaintiff on March 31, 1978, and RJR terminated the plaintiff on May 1, 1978. The plaintiff, however, was dealing with all six major tobacco companies, and at the time of trial was still dealing with three of these companies. In addition, B&W, prior to its termination of the plaintiff, made an offer to the plaintiff in the form of a counter-proposal to continue their relationship provided that B&W could send its payments directly to the vending machine operators. The plaintiff rejected this offer and elected to not continue to do business with B&W.

Moreover, the representatives of the defendants, who at trial were called by the plaintiff as on cross-examination, stated different reasons for their decisions to terminate the plaintiff. The representative of B&W testified that B&W terminated the plaintiff because of a company policy that absolutely prohibited a non-owner or non-operator of a vending machine to participate in B&W's promotional allowance programs. Lorillard's representative testified that Lorillard terminated the plaintiff due primarily to the inaccuracy of the reports that the plaintiff submitted to Lorillard. Finally, the representative of RJR testified that RJR terminated the plaintiff because of a desire to have RJR personnel directly contact the operators of vending machines and to make direct cash payments to them in an effort to induce the operators to place as many RJR brands as possible in their machines.

The plaintiff produced uncontradicted evidence that there was a trade show of the National Automatic Merchandising Association (NAMA) in Chicago between October 12, 1977 and October 16, 1977, which representatives of the major tobacco companies, including the defendants, attended and had attended for many years. It was the custom of the tobacco industry to have the person in charge of vending for a particular tobacco company attend the show. No evidence was presented by the plaintiff, however, that the representatives of the three defendants had any discussions concerning the plaintiff at the Chicago trade show. Furthermore, the representatives of the defendants called to the stand by the plaintiff as on cross-examination testified that there was no discussion concerning the plaintiff at the trade show or any other time. In addition, each of the defendants' representatives testified without contradiction by the plaintiff that they had no knowledge of the actions of the other two defendants in terminating the plaintiff.

The only other witness called by the plaintiff's counsel was the plaintiff himself, and he offered no additional evidence concerning the existence of a conspiracy other than the fact that a representative of B&W told him that there had been a meeting in Chicago of the NAMA and sent the plaintiff a report of the meeting that appeared in a trade journal...