Adams Dairy Company v. St. Louis Dairy Company

• Citation: 260 F.2d 46
• Decision Date: 14 October 1958
• Docket Number: No. 15856.,15856.
• Parties: ADAMS DAIRY COMPANY, a Corporation, Appellant, v. ST. LOUIS DAIRY COMPANY, a Corporation, Pevely Dairy Company, a Corporation, and Milk Wagon Drivers and Inside Dairy Workers Local Union No. 603, American Federation of Labor, a Voluntary Labor Organization, Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

260 F.2d 46 (1958)

ADAMS DAIRY COMPANY, a Corporation, Appellant, v. ST. LOUIS DAIRY COMPANY, a Corporation, Pevely Dairy Company, a Corporation, and Milk Wagon Drivers and Inside Dairy Workers Local Union No. 603, American Federation of Labor, a Voluntary Labor Organization, Appellees.

No. 15856.

United States Court of Appeals Eighth Circuit.

October 14, 1958.

Charles V. Garnett, Kansas City, Mo. (F. William McCalpin, St. Louis, Mo., Harvey Burrus and Rufus Burrus, Independence, Mo., were with him on the brief), for appellant.

John H. Lashly, St. Louis, Mo. (Jacob M. Lashly, Paul B. Rava and Lashly, Lashly & Miller, St. Louis, Mo., were with him on the brief), for appellee St. Louis Dairy Co.

E. C. Hartman, St. Louis, Mo. (Alexander Kerckhoff and Hartman, Guilfoil & Albrecht, St. Louis, Mo., were with him on the brief), for appellee Pevely Dairy Co.

Harry H. Craig, St. Louis, Mo. (Norman W. Armbruster, John T. Wiley, Jr., and Wiley, Craig, Armbruster, Schmidt & Wilburn, St. Louis, Mo., were with him on the brief), for appellee, Union.

Before GARDNER, Chief Judge, and VOGEL and MATTHES, Circuit Judges.

MATTHES, Circuit Judge.

In this action, based upon an alleged violation of Section 1 of the Sherman Act,¹ wherein recovery was sought for threefold the damages allegedly sustained by Adams Dairy Company, the appeal is from the judgment following jury verdict that it take nothing by this suit.²

The meritorious appellate issues are focused upon: (1) the failure of the trial court to charge the jury that the written labor contract executed by all of the parties to this litigation, and twenty-seven "small" dairies operating in the St. Louis, Missouri area (not parties to or involved in this controversy) in and of itself, in light of the evidence, was an illegal contract in restraint of trade and violative of the Sherman Act;³ and (2) the actions, comments and rulings of the trial judge, throughout the course of the trial, the cumulative effect of which, according to appellant's contention, prevented it from having a fair and impartial trial.

In summary, the events and circumstances pertinent to the first contention are as follows: Adams, with St. Louis Dairy and Pevely, is engaged in the fluid milk industry in the St. Louis, Missouri area, where, in 1947, St. Louis Dairy supplied approximately 27 per cent and Pevely approximately 36 per cent of the fluid milk that was marketed. The Union, a voluntary labor organization, was the bargaining agent for the employees of the St. Louis area dairies, including Adams, St. Louis Dairy and Pevely. A more detailed recitation of the relation between the Union and the individual dairies will be set out hereafter.

Adams was a newcomer in the St. Louis market, having started operations in November, 1947. The president of the company testified that he had studied the market conditions in St. Louis for sometime, observing among other things that no milk was offered for sale in paper containers, and that retail sales in stores were small as compared with sales made direct to the homes of the consumers. He stated that to create large volume sales through food stores, it was essential that milk be placed in disposable paper containers and sold to such stores at a price that would enable them to resell to the consumer at a price at least 2 cents less than the consumer would pay for direct delivery to the home. With these factors in mind, Adams entered the St. Louis market, and was able to provide milk in paper cartons, selling only to retail outlets, principally supermarkets, at a price which would enable them to compete with home deliveries. Adams conducted its sales entirely on a wholesale basis, selling large volumes to relatively few food stores. When Adams entered the market, the other dairies, including St. Louis Dairy and Pevely, began marketing milk in paper containers. Appellee dairies, though selling wholesale accounts, also had a large volume of home delivery accounts. Adams made no home deliveries.

As stated, the Union served the milk industry in St. Louis as bargaining agent for the employees of the various dairies, including the parties here involved. It negotiates what is known as an "industry-wide contract," that is, one contract which is signed by all of the dairies in the area. It also appears that there was in existence an employer association of some 27 "small" dairies known as the "St. Louis Milk Distributors' Association," the purpose of which was to enable the employer group to present a solid front, in behalf of the 27 dairies it represented, to the labor union in the negotiation of labor contracts, and it was the custom of the Union to meet with representatives of Pevely, St. Louis Dairy, and the Association and negotiate labor agreements, which were then presented to the individual dairies for signatures. Adams joined the Association in 1948 and continued its membership until the contract here in controversy was presented. Appellee dairies were never members of the Association.

A substantial element of cost to any dairy is the expense incurred in delivery of its product. Adams' complaint is based upon the allegation that the industry-wide labor contract of July 1, 1950, was entered into by appellee dairies and the Union for the purpose of adversely affecting Adams' costs of delivery, thereby compelling Adams to lose its competitive position price-wise in the St. Louis area. In order to understand Adams' position in the competitive market, it is necessary to review in some detail the delivery cost structure under which all dairies operated, pursuant to the provisions of the industry-wide union contract applicable when Adams first entered the St. Louis market, and under which Adams, and the appellee dairies operated until the new contract of July 1, 1950, was put into effect. The drivers who delivered milk, whether at retail to the home, or at wholesale to food stores, were paid on a commission basis, governed by the terms of the union contract. Under the contract, each driver was paid a base salary, then commissions were paid on a "point" system — each "point" representing a unit of dairy products, such as a quart of milk, a half-pint of cream, etc. Under the union contract in existence when Adams entered the market, no commissions were paid on the first 12,500 points per month; from 12,500 to 24,000 points, the driver was paid ½ cent per point; 24,000 to 27,000, 1 cent per point; 27,000 to 30,000, 1½ cents per point; and on all sales over 30,000 points, 2 cents per point. Because of the nature of the market supplied by Adams (twelve routes supplying large supermarkets almost exclusively), large volumes were delivered by relatively few drivers — thus at the time of the negotiations for the 1950 contract, Adams' twelve routes averaged more than 55,000 points per month, with some routes running as high as 80,000 points per month. It was testified that Adams' drivers had annual earnings as high as $15,000 to $17,500. Another cost factor which might be mentioned is that of overhead in the maintenance of trucks, gas, oil, etc. Again, because of the large volume deliveries, Adams was able to spread these operating costs, with a resultant low rate per unit cost for delivery.

It appears that appellee dairies were in a different position. For example, on July 1, 1950, Pevely had 300 retail routes and 89 wholesale routes, the retail routes averaging something less than 10,000 points per month, and the wholesale routes a little over 21,000 points per month. St. Louis Dairy operated 173 retail routes, averaging 11,236 points, and 43 wholesale routes, averaging 26,674 points. It further appears that during the period from January 1, 1948, to June 30, 1950, Pevely had only two wholesale routes which averaged more than 30,000 points per month and no wholesale routes averaging more than 40,000 points, the two "high point" routes averaging 31,682 and 31,015 points for only 20 of the 30 months of that period. From the record it appears that St. Louis Dairy had only two routes averaging more than 30,000 and no routes averaging more than 40,000 points per month.

We now come to the 1950 contract of which Adams complains. Briefly, the offending clause provided that drivers were to be paid a commission of 4 cents per unit on all points per month above 40,000. In addition, any driver whose route was split was to receive full base pay, plus average commissions equal to his monthly earnings just prior to the split, for a period of four months following the splitting of routes. Adams charged that when faced with an increase of commissions from 2 cents to 4 cents on all units over 40,000, and as applied to its drivers whose routes averaged 55,000 units, it had a choice of closing down operations or splitting the routes, so that no one driver would have such volume as to carry sales into the prohibitive 4-cent rate. Adams prevailed on the union to delay the effective date of the new wholesale commission rate for a period of 60 days, during which period Adams purchased 10 new trucks and divided the routes, so that when the contract terminated four years later, Adams was using 34 routes to handle the deliveries. It further appears that the Adams drivers, dissatisfied with the cut in their income, organized their own labor union, signed a new contract eliminating the 4-cent rate, and that routes were then reduced in number.

Adams alleged, and here contends, that the clause increasing the commission to 4 cents served no legitimate labor purpose; that Adams was the only dairy company adversely affected by the clause, inasmuch as the other dairies did not have routes reaching into 40,000 points, and that its sole purpose was to increase Adams' distribution costs, thereby forcing it from the competitive market. The appellee dairies and the Union insist that the contract was negotiated at arm's length; that the Union was solely concerned with improved conditions in the dairy...