AP Hopkins Corp. v. Studebaker Corp., Onan Division

• Decision Date: 29 December 1972
• Docket Number: Civ. A. No. 29403.
• Citation: 355 F. Supp. 816
• Parties: A. P. HOPKINS CORPORATION, a Michigan corporation, Plaintiff, v. STUDEBAKER CORPORATION, ONAN DIVISION, a Michigan corporation, et al., Defendants.
• Court: U.S. District Court — Western District of Michigan

355 F. Supp. 816

A. P. HOPKINS CORPORATION, a Michigan corporation, Plaintiff, v. STUDEBAKER CORPORATION, ONAN DIVISION, a Michigan corporation, et al., Defendants.

Civ. A. No. 29403.

United States District Court, E. D. Michigan, S. D.

December 29, 1972.

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Joseph W. Louisell and Philip A. Gillis, Detroit, Mich., for A. P. Hopkins Corp., a Mich. Corp.

Carson C. Grunewald, Bodman, Longley, Bogle, Armstrong & Dahling, Detroit, Mich., for Studebaker Corp., Onan Division, a Michigan Corp.

Edmund M. Brady, Jr., Vandeveer, Doelle, Garzia, Tonkin & Kerr, Detroit, Mich., for Carroll-Stuart Corporation, a Michigan Corp.; Arthur B. Stuart, Stewart R. Kaufman and Harry M. Hennequin.

OPINION

FREEMAN, District Judge.

This is an action to recover treble damages for violations of the anti-trust laws. Jurisdiction is alleged under 15 U.S.C. §§ 1, 4, 13(a), 15, 22 and 26.

The principal defendant in this litigation, the Studebaker Corporation, Onan Division, manufactures engine driven generators which are sold to selected distributors throughout the country. The generators, or plants, as they are sometimes called, range in power from one kilowatt to 450 kilowatts and are used to produce stand-by power for various purposes including use on construction sites and in hospitals. Onan also manufactures parts for generators. The plaintiff, A. P. Hopkins Corporation, was a distributor of Onan products from 1958 to 1965 in the eastern half of lower Michigan, selling both plants and parts.

Plaintiff, A. P. Hopkins Corporation, and defendant, Studebaker Corporation, Onan Division, hereinafter referred to as "Onan", entered into a Distributor Sales Agreement on February 28, 1961, which was terminated by letter of May 28, 1965. Carroll-Stuart Corporation succeeded plaintiff following the termination of the plaintiff as Onan's distributor in this area. Defendant Arthur B. Stuart was one of the incorporators of that firm. Defendants Stewart R. Kaufman and Harry M. Hennequin were former employees of the plaintiff who became employees of the Carroll-Stuart Corporation upon its formation as an Onan distributor.

The gravamen of plaintiff's complaint is that the defendants conspired to drive the plaintiff out of business by engaging in certain practices. In the pretrial order filed in this case, the plaintiff set out the following allegations of wrongful conduct by the defendants. First defendants are accused of interfering with plaintiff's customers and contracts negotiated with those customers. Secondly, plaintiff asserts that the defendants, together with other Onan distributors, arbitrarily and capriciously refused to sell Onan products to plaintiff. Thirdly, defendant Onan is accused of establishing exclusive distributorships with illegal territorial restrictions on the sale of Onan products. Fourth, plaintiff accuses the defendants and other distributors of Onan products not named as defendants of selling to plaintiff at discriminatorily high prices in an effort to drive the plaintiff out of business. Fifth, plaintiff alleges that there was a conspiracy by defendants to hire away the employees of the plaintiff. Sixth, plaintiff alleges a breach of the Distributor Sales Agreement and the Service Station agreement in effect between the parties. Seventh, plaintiff alleges price fixing in violation of anti-trust laws.

Plaintiff's allegation of a breach of the agreements between the parties was not discussed in the trial brief submitted to this court. Nor was the matter of breach of any agreement set forth in the proposed findings of fact and conclusions of law. Moreover, no evidence presented at trial was directed to this allegation which we, therefore, consider abandoned.

Plaintiff asserts violations of 15 U.S. C. §§ 1 and 13(a). Under Section 1 of the Sherman Act every conspiracy in restraint of trade or commerce is illegal. According to plaintiff's allegations, defendant Onan conspired with its distributor Carroll-Stuart to drive the plaintiff out of business. As a part of this conspiracy plaintiff contends that the defendant Onan terminated plaintiff's distributorship; that Onan and Carroll-Stuart conspired together to prevent the plaintiff from purchasing Onan products from the defendants or any of Onan's other distributors; that when the defendants and other Onan distributors did sell to the plaintiff, it was at discriminatory prices; that defendants interfered with plaintiff's customers and contracts with customers; and that defendants lured away all of plaintiff's employees.

A group boycott or a concerted refusal by traders to deal with other traders is not permissible under the Sherman Act. Thus, in Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959), the court found violations of Sections 1 and 2 of the Sherman Act where the evidence clearly showed a group boycott against sales to the plaintiff. In that case plaintiff Klor's was a retail establishment that sold appliances. Defendant Broadway-Hale, a retail chain of department stores, operated a store next door to Klor's that competed with Klor's in the sale of appliances. The court found that manufacturers and distributors of many major brands of appliances had conspired among themselves and with Broadway-Hale "either not to sell to Klor's or to sell to it only at discriminatory prices and highly unfavorable terms." The defendants admitted such practices. However, they sought to justify their actions. But the court said that group boycotts are in "the forbidden category", and cannot be saved by allegations that they are reasonable or that they failed to accomplish any illegal end such as price fixing, or restraint of competition. In addition, the court stated that the concerted refusal to deal carried with it by its nature and character a tendency toward monopoly. The court also pointed out that the boycott would not be tolerated merely because it would destroy only one merchant. Thus from the Klor's case it is clear that a concerted refusal to deal with one retailer by manufacturers and distributors at the behest of another retailer is forbidden. It is also significant for purposes of the case at bar to note that one member of the conspiracy in Klor's was a competitor of the plaintiff. The court distinguished the forbidden group boycott from the situation where one trader refuses to deal with another and from the situation where one manufacturer and one dealer agree to an exclusive distributorship which are not forbidden.

Of course, the Klor's case can be distinguished from the case at bar in that only one manufacturer and its distributors are accused of conspiring against the plaintiff and not several different manufacturers as was true in Klor's. Nevertheless, it is clear that such a distinction is not pertinent in a case involving group boycotts. Thus, in United States v. Parke, Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 (1960), the court disapproved of the efforts of Parke, Davis to gain compliance of its distributors with a plan to fix the prices at which retail drugstores would sell Parke, Davis products. Thus the fact that only one manufacturer is involved in the alleged conspiracy does not place the defendants beyond the reach of the interpretation of the Sherman Act set forth in Klor's.

In United States v. General Motors Corporation, 384 U.S. 127, 86 S.Ct. 1321, 16 L.Ed.2d 415 (1966), the court found a violation of Section 1 of the Sherman Act where it was shown that General Motors together with its car dealers had conspired to prevent discount houses from selling certain automobiles manufactured by the General Motors Corporation. In General Motors, the court discussed the Klor's case and found it to be authority for its decision. The court went on to state following its discussion of Klor's and several other cases concerning group boycotts that

The principle of these cases is that where businessmen concert their actions in order to deprive others of access to merchandise which the latter wish to sell to the public, we need not inquire into the economic motivation underlying their conduct.

In other words the court made clear that concerted refusals to deal are illegal on their face.

In Ford Motor Co. v. Webster's Auto Sales, Inc., 361 F.2d 874 (1st Cir. 1966), a case relied upon by plaintiff, the defendant manufacturer was found to have entered into agreements with its dealers to prevent the plaintiff from obtaining "factory Fords," late model automobiles driven by Ford employees on company business and then sold through regular Ford dealers. There was strong evidence in this case to support the jury's conclusion. Defendant sent a letter to its dealers stating that future sales of factory Fords to wholesalers like plaintiff "cannot be tolerated". The Court of Appeals held that under their interpretation of the General Motors case, the agreements were "per se violations of the Sherman Act," p. 883.

Defendants apparently do not quarrel with this theory of legal liability. In the trial brief filed in this matter by defendant Onan and adopted by the other defendants, the argument directed to the allegation of the claim of refusal to deal is confined to presentation of facts and does not include any contradiction of plaintiff's theory of liability based on Klor's and Ford Motor.

We now direct our attention to the evidence presented at trial to determine whether in fact defendants can be found to have engineered a concerted refusal to deal in order to drive the plaintiff out of business. It is clear from the testimony that subsequent to Onan's letter terminating plaintiff as its distributor, Onan filled those orders placed prior to termination. These were filled during the month of June. However, upon inquiry for parts by plaintiff's secretary, Delores Zaluski, in July of 1965, Onan advised her to see the local Onan distributor. Nevertheless, Onan did...