Atlantic Heel Co. v. Allied Heel Co., 5713.

Citation284 F.2d 879
Decision Date15 December 1960
Docket NumberNo. 5713.,5713.
PartiesATLANTIC HEEL CO., Inc., Plaintiff, Appellant, v. ALLIED HEEL CO., Inc., et al., Defendants, Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (1st Circuit)

Claude B. Cross, Boston, Mass., with whom John M. Reed and Withington, Cross, Park & McCann, Boston, Mass., were on brief, for appellant.

Edward L. LaVine, Boston, Mass., with whom Samuel Markell, Joseph B. Abrams and Goulston & Storrs, Boston, Mass., were on brief, for appellees.

Before WOODBURY, Chief Judge, and HARTIGAN and ALDRICH, Circuit Judges.

HARTIGAN, Circuit Judge.

This is an appeal from a judgment of the United States District Court for the District of Massachusetts dismissing plaintiff's complaint for failure to state a claim under the Sherman Act, 15 U.S. C.A. § 1.

Plaintiff-appellant, Atlantic Heel Co., Inc., filed a complaint alleging that plaintiff is a Massachusetts corporation engaged in the manufacture and sale of leather and leatherboard heels; that its plant is located in Boston; its suppliers and customers are located in several states; it is a leading concern in the supply of leather and leatherboard heels, and has a substantial share of the interstate business in the related lines of merchandise.

The complaint further alleges that defendants conspired and are conspiring to restrain the plaintiff in its interstate and foreign business, more particularly that defendants conspired to destroy plaintiff in its interstate and foreign business, and in furtherance of this purpose (1) established a business competitive with that of plaintiff, originally operated as a partnership by some of the defendants, and presently expanded and operated also as defendant Allied Heel Co., Inc., a Massachusetts corporation; (2) defendant Irving J. Keiter, acting for himself and for the other defendants induced and enticed the superintendent of plaintiff's factory and other key employees to leave plaintiff and work for defendant Allied, and as a consequence the quality and volume of plaintiff's production was impaired, and plaintiff had to make expenditures which otherwise would have been unnecessary; (3) defendant Irving J. Keiter, at the instigation and in behalf of all the defendants, visited plaintiff's plant without plaintiff's acquiescence or consent for the purpose of obtaining valuable and confidential trade secrets; (4) all the defendants have disparaged plaintiff and its products by intentionally false statements relative to plaintiff's financial standing and other matters to persons including established customers and suppliers of plaintiff, with the result that plaintiff's relations with its customers and suppliers have been damaged; (5) defendants Keiter, acting for themselves and the other defendants, solicited salesmen who had been commission representatives of plaintiff to induce, and did induce two such salesmen, to cease representing plaintiff and undertake representation of defendant Allied with the result that plaintiff has lost valuable business in those territories; (6) defendants Keiter, acting for themselves, and on information and belief in behalf of the other defendants, instituted, in bad faith, a suit against plaintiff and plaintiff's president with the intent and purpose of damaging plaintiff by false allegations as to diversion and waste of corporate funds and by a request for a receiver, with the result that plaintiff has been damaged in its relations with customers and suppliers; (7) on information and belief that one or more of defendants Keiter, acting for themselves and in behalf and at the instigation of the other defendants, interfered with plaintiff's sources of supply of raw materials, causing delay in the filling of plaintiff's orders to such suppliers, with the intent and effect of rendering plaintiff unable to meet its customers' orders, resulting in the cancellation of orders by plaintiff's customers and loss of their future business; (8) defendants Keiter and Allied on information and belief falsely represented that defendant Allied was a branch or otherwise affiliated with plaintiff in order to obtain credit for defendant Allied with suppliers, utilities and others; (9) one or more of defendants Keiter acting for themselves and at the instigation of the other defendants visited plaintiff's plant at various times to interfere with plaintiff's employees in the performance of their duties by making disparaging remarks concerning plaintiff and plaintiff's president and statements intended to disturb or distract such employees from their regular functions, resulting in a loss of quantity and volume of plaintiff's production and attendant loss of profits; (10) defendant Irving J. Keiter in behalf of himself and the other defendants violated his fiduciary duty to plaintiff as a director by performing the acts attributable to him during his tenure as director of plaintiff. The complaint further alleges that course of action undertaken by defendants has had and will have the effect of eliminating plaintiff from and restraining plaintiff in its position as one of the leading concerns in the supply of leather and leatherboard heels; that such elimination and restraint will injure the interests of the public and the trade by removing a substantial supplier of materials for the shoe industry in interstate commerce with a resultant harmful effect on prices and on the availability of choice to customers in the trade. Plaintiff alleges it has suffered damages in the amount of $250,000 and seeks judgment for treble damages, an injunction, costs and reasonable attorney's fees.

Defendants filed a motion to dismiss the action under Rule 12(b) (6) F.R. Civ.P., 28 U.S.C. for failure to state a claim under Title 15 U.S.C.A. §§ 1, 15 or 26 upon which relief could be granted by the district court. The district court in a brief memorandum decision held that "the allegations are deemed insufficient to bring the case within the scope of the federal antitrust laws" and a judgment of dismissal was entered on June 8, 1960.

The question presented on this appeal is whether or not the complaint sufficiently alleges a violation of Section 1 of the Sherman Act, 26 Stat. 209 as amended, 15 U.S.C.A. § 1.

In Mitchell Woodbury Corp. v. Albert Pick-Barth Co., 1 Cir., 1930, 41 F.2d 148, 151 this court held sufficient a complaint which alleged a conspiracy to restrain the interstate trade of the plaintiff and to destroy its trade in kitchen equipment and utensils. This court there said:

"Here the alleged intent of a conspiracy between the defendants was to destroy the competition of the plaintiff and deprive it of its interstate business. If proven as alleged, it was an unlawful purpose, an undue interference with interstate commerce, and to that extent is injurious to the public interest, which is entitled to the free and full flow of interstate trade, subject only to such effect as natural and reasonable competition may have upon it."

The complaint there alleged that the defendant "was one of a combination of corporations of similar name and allied interests engaged in the same business as the plaintiff, and constituted the largest and dominating factor in that trade throughout the United States; * * *" Id., at page 149. Although this allegation is mentioned by the court, it does not seem crucial to the court's analysis of the gravamen of the alleged violation of the antitrust laws.

After a trial on the merits, judgment was entered for the plaintiff despite a special finding by the jury that "the acquisition of the plaintiff's business did not effect an unreasonable restraint of trade." On appeal, this court said in Albert Pick-Barth Co. v. Mitchell Woodbury Corp., 1 Cir., 57 F.2d 96, 102, certiorari denied 1932, 286 U.S. 552, 52 S.Ct. 503, 76 L.Ed. 1288:

"To constitute an offense under section 1 of the Sherman Act, it is not necessary, if a conspiracy is proven, the purpose and intent of which was to eliminate by unfair means a competitor in interstate trade, to show that the public was affected, and to what extent. Nor is it necessary under this act, as it is at common law, to prove any overt acts in order to constitute the offense defined in section 1; but if overt acts are proved in furtherance of the offense defined in section 1, and any one is thereby injured in his business or property, the conspirators under section 7 of the Act are liable therefor."

Since Mitchell Woodbury Corp. is so closely similar to the facts alleged in the instant case, we are warranted in reversing the lower court unless there are persuasive arguments for repudiating the view we held there.

In Apex Hosiery Co. v. Leader, 1940, 310 U.S. 469, 60 S.Ct. 982, 84 L.Ed. 1311, the Supreme Court held that the members of a labor union who, for the purpose of unionizing a factory the business of which was largely interstate, engaged in a protracted sit-down strike forcing the suspension of the interstate business, and who explicitly refused requests to allow removal of finished merchandise for fulfillment of interstate orders, were not engaged in a conspiracy in restraint of trade within the meaning of the Sherman Act. The Court's opinion contained the following language:

"* * * The end sought was the prevention of restraints to free competition in business and commercial transactions which tended to restrict production, raise prices or otherwise control the market to the detriment of purchasers or consumers of goods and services, all of which had come to be regarded as a special form of public injury." Id., 310 U.S. at page 493, 60 S.Ct. at page 992.
"* * * In the cases considered by this Court since the Standard Oil case Standard Oil Co. v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 in 1911 some form of restraint of commercial competition has been the sine qua non to the condemnation of contracts, combinations or conspiracies under the Sherman Act, and in general restraints upon competition have been
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