Armstrong Cork Company v. Lyons

• Decision Date: 21 September 1966
• Docket Number: No. 18060.,18060.
• Citation: 366 F.2d 206
• Parties: ARMSTRONG CORK COMPANY, Appellant, v. John T. LYONS and Ruth E. Lyons, Co-Partners doing business as Lyons Utility Company, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

366 F.2d 206 (1966)

ARMSTRONG CORK COMPANY, Appellant, v. John T. LYONS and Ruth E. Lyons, Co-Partners doing business as Lyons Utility Company, Appellees.

No. 18060.

United States Court of Appeals Eighth Circuit.

September 21, 1966.

Armin M. Johnson, Minneapolis, Minn., for appellant; John D. French and Lawrence C. Brown, Minneapolis, Minn., John G. Buchanan, Jr., and Buchanan, Ingersoll, Rodewald, Kyle & Buerger, Pittsburgh, Pa., and Faegre & Benson, Minneapolis, Minn., on the brief.

Harry H. Peterson, Minneapolis, Minn., for appellees.

Before VAN OOSTERHOUT, MATTHES and MEHAFFY, Circuit Judges.

MEHAFFY, Circuit Judge.

John T. Lyons and Ruth E. Lyons, d/b/a Lyons Utility Company, appellees (hereafter Lyons), brought this treble damage action for alleged violations of the antitrust laws¹ against Armstrong Cork Company (hereinafter Armstrong) and Carpenter Paper Company (hereinafter Carpenter), alleging that Armstrong and Carpenter unlawfully combined and conspired with each other in restraint of trade for the purpose of creating a monopoly for the sale of Armstrong's products in an area served by Lyons, an Armstrong wholesale dealer, and further that Armstrong and Carpenter conspired to fix and maintain prices in the trade area to the damage of Lyons.²

On November 2, 1954, Armstrong and Lyons entered into a non-exclusive contract providing that Lyons sell at wholesale Armstrong's "lumber dealer products." The agreement also provided that Armstrong would furnish to Lyons, upon Lyons' request, Armstrong's suggested retail prices for Armstrong's products. Lyons' trade area included the Minneapolis-St. Paul area as well as parts of several nearby states. In 1959, Carpenter was also made an Armstrong distributor in the Minneapolis-St. Paul area. Subsequent to becoming Lyons' competitor, Carpenter inaugurated a policy of free delivery service on Armstrong's products to its customers in the Twin City territory. Lyons responded by complaining to no avail to Armstrong and announcing by letter a 5% discount on Armstrong's products which in turn brought complaints from Carpenter. During this period representatives of Armstrong were calling on both dealers, apparently in an attempt to pacify them, but without success. Shortly thereafter, Lyons wrote another letter to its customers withdrawing the discount, seemingly under the mistaken impression that Carpenter would withdraw its free delivery service. Lyons testified that its business increased after offering the discount and continued to prosper for some months thereafter. While Lyons had previously been a good dealer for Armstrong he was seventy years old and operated his business without any sales organization and had not achieved sales quotas Armstrong thought reasonable. On January 5, 1961, Armstrong terminated its agreement with Lyons, according to a valid termination clause in the original contract.

Suit was filed and the case proceeded to trial. At the conclusion of plaintiff's evidence, both Armstrong and Carpenter filed motions to dismiss. The trial court granted Carpenter's motion because there was no evidence of collusion or conspiracy between Carpenter and Armstrong. Armstrong's motion was denied. Despite Armstrong's protests, the court proceeded with the trial. Upon conclusion of all evidence, Armstrong's renewed motion to dismiss was also denied.

Along with its answer, Armstrong alleged a counterclaim for goods sold and delivered. Lyons conceded this indebtedness. After the jury's verdict awarding damages to Lyons, Armstrong's timely motion for judgment n. o. v. was denied. Judgment was entered for plaintiff in treble the jury's award less the amount of the admitted counterclaim. We reverse.

Lyons' complaint was based solely on an alleged combination or conspiracy between Armstrong and Carpenter. This theory was not altered at trial. Thus, the verdict of the jury was based on a theory other than that alleged in the pleadings. The District Court, however, was of the opinion that the evidence might possibly have indicated that Lyons and Armstrong had conspired, contracted or combined within the meaning of the Sherman Act (15 U.S.C.A. § 1). Nevertheless, this specific theory was not in any fashion pointed out in the court's instructions. The instructions were very broad but without specific objections. Therefore, Armstrong was placed in an untenable position by having to defend against an issue not suggested by the pleadings or illuminated by the evidence. Additionally, the jury returned a verdict without specific guiding instructions on a recoverable theory that only the court had detected or perceived. The District Court had this to say in its unpublished memorandum:

"The original complaint alleged that Armstrong and Carpenter had conspired to violate the antitrust laws. This theory was never really altered at the trial, even after Carpenter had been dismissed because of the complete failure of the evidence to show any violation of the law on its part. The plaintiff wanted the jury to consider whether there had been violation of 15 U.S.C. §§ 1, 2, 13 and 14, but the Court ruled that only 15 U.S.C. § 1 could have any applicability to the evidence presented. This section, of course, requires a `conspiracy\' or `contract\' or `combination.\' The possibility that Lyons and Armstrong may have been the parties conspiring, contracting or combining within the meaning of the statute was never more than mentioned in passing. Although this Court considered its instructions broad enough to cover that possibility, no attempt was made to point it out. The defendant has not, however, sought a new trial. Therefore, since the verdict is within the evidence and is not contrary to the instructions given, the defendant\'s motion for judgment N.O.V. should be denied. The plaintiffs should consider the advisability of amending the pleadings to conform to the evidence."

The issue which the District Court seemed to think accrued was certainly not voluntarily litigated by Armstrong, which had not been put on notice of any other issues save the combination and conspiracy alleged in the complaint. The principle governing the prohibition of placing Armstrong in such an unfair position is well stated by the late Judge Sanborn in Sylvan Beach v. Koch, 140 F.2d 852, 861-862 (8th Cir. 1944):

"A court may not, without the consent of all persons affected, enter a judgment which goes beyond the claim asserted in the pleadings. (Citing cases.) Unless all parties in interest are in court and have

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