Ace Beer Distributors, Inc. v. Kohn, Inc., 14808

• Decision Date: 11 June 1963
• Docket Number: 14974.,No. 14808,14808
• Citation: 318 F.2d 283
• Parties: ACE BEER DISTRIBUTORS, INC., Plaintiff-Appellant, v. KOHN, INC., The Kohn Brewery Co., Pauline Kohn, Adam J. Kohn, Stephen Zarich and Peter Zarich, Defendants-Appellees. ACE BEER DISTRIBUTORS, INC., Plaintiff-Appellant, v. The STROH BREWERY COMPANY and Morton R. Engel, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

318 F.2d 283 (1963)

ACE BEER DISTRIBUTORS, INC., Plaintiff-Appellant, v. KOHN, INC., The Kohn Brewery Co., Pauline Kohn, Adam J. Kohn, Stephen Zarich and Peter Zarich, Defendants-Appellees.

ACE BEER DISTRIBUTORS, INC., Plaintiff-Appellant, v. The STROH BREWERY COMPANY and Morton R. Engel, Defendants-Appellees.

Nos. 14808, 14974.

United States Court of Appeals Sixth Circuit.

June 11, 1963.

Myron N. Krotinger, Cleveland, Ohio, for appellant, Lane, Krotinger & Santora, David F. Dobbins, Cleveland, Ohio, on the brief.

C. Kenneth Clark, Jr., Youngstown, Ohio, for appellees, Kohn, Inc., and others, Harrington, Huxley & Smith, C. Kenneth Clark, Youngstown, Ohio, on the brief.

Rockwell T. Gust, Detroit, Mich., for appellees, Stroh Brewery Co. and others, Butzel, Eaman, Long, Gust & Kennedy, Detroit, Mich., Arter, Hadden, Wykoff & Van Duzer, Sumner Canary, Cleveland, Ohio, on the brief.

Before CECIL, Chief Judge, and MILLER and O'SULLIVAN, Circuit Judges.

SHACKELFORD MILLER, Jr., Circuit Judge.

The plaintiff, Ace Beer Distributors, Inc., brought this action under the Sherman Antitrust Act and the Clayton Act, Sections I et seq., Title 15 United States Code, seeking triple damages in the amount of $750,000.00 from the eight defendants, who are the appellees in these two appeals, for alleged violation of the provisions of the Antitrust Laws. Diversity of citizenship does not exist and jurisdiction is restricted to the alleged violation of the antitrust laws. Section 15, Title 15, United States Code.

Following the filing of the complaint, the plaintiff moved for a preliminary injunction which the District Judge denied. This ruling was affirmed by this Court without opinion. Ace Beer Distributors, Inc. v. Kohn, Inc., et al., 280 F.2d 424, C.A.6th. Answers to the complaint were promptly filed by the various defendants and extensive discovery proceedings were undertaken by both sides. The action was pretried in May 1961. Thereafter, and before trial, six of the defendants, who are appellees in appeal No. 14808, concluded that the complaint did not state a claim upon which relief could be granted and on June 30, 1961, they moved for judgment on the pleadings upon the ground that the complaint failed to state a claim upon which relief could be granted. On November 8, 1961, the District Judge sustained this motion and entered an order dismissing the action. Appeal No. 14808 followed. Two of the defendants, The Stroh Brewery Company and Morton R. Engel, its Ohio Sales Manager, did not join in the motion, but later filed their separate motion to the same effect, which the District Judge sustained by order of March 2, 1962. Appeal No. 14974 was taken from that order. The appeals have been consolidated in this Court.

Appellant's brief states in considerable detail the facts as developed by the pretrial depositions and the argument on appeal is based to a large extent upon appellant's evaluation of this testimony. Appellees not only disagree with this evaluation of the testimony but take the position that since the only question before the Court on this appeal is whether the complaint states a claim upon which relief can be granted the pretrial testimony discussed by the appellant is not before the Court and should not be considered. We are of the opinion that this is the correct view in the matter. Accordingly, our consideration of this appeal will be restricted to the allegations of the complaint.

The material allegations of the complaint are as follows: The defendant Stroh Brewery Company, hereinafter referred to as Stroh, is an Arizona corporation having its principal place of business in Detroit, Michigan. The plaintiff is an Ohio corporation and a wholly owned subsidiary of the Genesee Distributing Company, hereinafter referred to as Genesee. At the times referred to plaintiff and Stroh were engaged in interstate commerce. Stroh's beer moved from Detroit, Michigan in a regular continuous and uninterrupted flow to distributors and ultimate users in Ohio.

Since the year 1936 Genesee and Stroh had been operating under an agreement which was to be in full force and effect for an indefinite term, wherein Genesee was designated the exclusive distributor in Mahoning and Trumbull Counties, Ohio of beer and other products manufactured by Stroh. In January 1956, Genesee and Stroh agreed that Genesee would set up a separate organization to distribute Stroh products exclusively. Accordingly, Genesee caused the plaintiff, Ace Beer Distributors, to be incorporated, whereupon the plaintiff was substituted for Genesee as the exclusive Stroh distributor in Mahoning and Trumbull Counties, Ohio.

Stroh was the only company for which the plaintiff acted as a distributor and it was the plaintiff's sole source and supply of merchandise for distribution and sale. Plaintiff fulfilled every requirement of its distributorship agreement and exerted its best efforts to sell and promote the sale of Stroh's products, and to that end incurred considerable sales and advertising expenses.

The complaint alleges that thereafter the defendants maliciously conspired to destroy plaintiff's business and to eliminate plaintiff as a beer distributor in interstate commerce and that the following steps were taken to consummate said conspiracy. The defendants secretly agreed that Stroh would cancel plaintiff's distribution franchise without giving plaintiff any prior notice and would simultaneously issue a new franchise to a corporation, Kohn, Inc., to be formed by the defendants, The Kohn Beverage Company, Pauline Kohn, and Adam J. Kohn; that pursuant to this conspiracy the defendants caused Kohn, Inc. to be incorporated on March 30, 1959; that the defendants, under false names and without disclosing the intended purpose, thereafter negotiated a lease for a suitable building in the Youngstown area from which Kohn, Inc. could operate; that the defendants further obtained a fleet of trucks from the Kohn Beverage Company of Akron, Ohio which were placed in readiness to commence operations as soon as Kohn, Inc. obtained a permit from the Ohio Department of Liquor Control and as soon as plaintiff's Stroh franchise was cancelled; that Kohn, Inc. obtained a permit from the Ohio Department of Liquor Control on April 17, 1959; that in furtherance of the conspiracy the defendants, or some of them, contacted plaintiff's manager, the defendant Stephen Zarich, a long trusted and key employee of the plaintiff, and also contacted his brother, the defendant Peter Zarich, Genesee route superintendent, who was also a long trusted and key employee, for the purpose of reaching a secret agreement with them that they would join the staff of Kohn, Inc. upon the obtaining by Kohn, Inc. of the distributorship of Stroh's beer in Mahoning and Trumbull Counties, Ohio; that at the instance of the defendants, Stephen Zarich and Peter Zarich contacted plaintiff's truck drivers and salesmen to induce them to leave the plaintiff en masse; on April 20, 1959 Stroh, tortiously and in furtherance of the conspiracy, cancelled plaintiff's franchise for the distribution of Stroh's beer and then promptly commenced selling merchandise to Kohn, Inc. for distribution and sale in Mahoning and Trumbull Counties, Ohio; that immediately after Stroh's cancellation of plaintiff's franchise, Stephen Zarich and Peter Zarich left their respective employments without any notice to their respective employers, and all but two of plaintiff's drivers and salesmen suddenly without notice to the plaintiff quit its employ on that day and immediately began employment with Kohn, Inc.; that the defendants knew that in the then state of the Youngstown labor market it would be impossible for plaintiff to hire other employees with comparable training and experience and that plaintiff's business would necessarily be destroyed, and that defendants have substantially destroyed plaintiff's business and have substantially destroyed plaintiff as a beer distributor in interstate commerce.

The District Judge in a Memorandum Opinion carefully analyzed the allegations of the complaint and concluded that even if it be conceded that a conspiracy existed, the object to be achieved was not one rendered obnoxious by the Sherman Act. Relying strongly upon Schwing Motor Company v. Hudson Sales Corp., D.C., 138 F.Supp. 899, affirmed 239 F.2d 176, C.A.4th, cert. denied, 355 U.S. 823, 78 S.Ct. 30, 2 L.Ed.2d 38, and Packard Motor Car Co. v. Webster Motor Car Co., 100 U.S.App.D.C. 161, ...