Banana Distributors v. United Fruit Company

• Decision Date: 08 May 1958
• Citation: 162 F. Supp. 32
• Parties: BANANA DISTRIBUTORS, Incorporated, Plaintiff, v. UNITED FRUIT COMPANY; and Fruit Dispatch Company, Defendants.
• Court: U.S. District Court — Southern District of New York

162 F. Supp. 32

BANANA DISTRIBUTORS, Incorporated, Plaintiff, v. UNITED FRUIT COMPANY; and Fruit Dispatch Company, Defendants.

United States District Court S. D. New York.

May 8, 1958.

COPYRIGHT MATERIAL OMITTED

Smith, Mathews, Bell & Solomon, New York City, for plaintiffs, Blackwell Smith, Ernest Leff, Arnold Fortas & Porter, Thurman Arnold, Washington, D. C., of counsel.

Davis, Polk, Wardwell, Sunderland & Kiendl, New York City, for defendants, Theodore Kiendl, Ralph M. Carson, Porter R. Chandler, Edwin J. Jacob, David G. Gill, David L. Farley, Jr., New York City, of counsel.

LEVET, District Judge.

This is an action for treble damages under the antitrust laws. The case was tried before a jury after a preliminary trial in reference to the statute of limitations, likewise before a jury, pursuant to Bertha Building Corporation v. National Theatres Corporation, 2 Cir., 1957, 248 F.2d 833, certiorari denied April 28, 1958, 78 S.Ct. 777. On the basis of the jury's factual conclusions in the preliminary trial this court determined that a three-year New York statute, Civil Practice Act, § 49, controlled. See Banana Distributors Inc., v. United Fruit Company and Fruit Dispatch Company, D.C. S.D.N.Y.1958, 158 F.Supp. 153; 158 F. Supp. 160. After a trial of the main issues lasting some thirty-nine court days, the jury disagreed. Motions by defendants under Rule 41(b) and Rule 50 of the Federal Rules of Civil Procedure, 28 U.S.C.A. are now to be determined.

The only litigants involved at the conclusion of the trial were Banana Distributors Incorporated, plaintiff, and United Fruit Company and Fruit Dispatch Company, defendants, the action having been dismissed as to all other parties. The plaintiff, Banana Distributors Incorporated, is a banana jobber, with its business located in Hartford, Connecticut. Defendant United Fruit Company produces bananas in the Central American tropics and transports them to the United States, where the defendant Fruit Dispatch Company distributes the fruit.

On January 24, 1958, at the close of plaintiff's case, pursuant to Rule 41(b) of the Federal Rules of Civil Procedure, the defendants severally moved for dismissal upon the merits on the ground that upon the facts and the law the plaintiff had shown no right to relief. Following argument, decision was reserved. At the close of all the evidence, the defendants renewed their previous motions and further moved for a directed verdict pursuant to Rule 50 of the Federal Rules of Civil Procedure, on which, after argument on February 11, 1958, decision was also reserved. After disagreement of the jury, these motions were renewed by the defendant on February 20, 1958. Subsequently, briefs and arguments thereon were presented on March 3, 1958.

Plaintiff claims that defendants, United Fruit and Fruit Dispatch, have monopolized and have conspired to monopolize and to restrain trade with respect to the importation and distribution of quality green bananas in the United States, and more particularly, in the Eastern Division of Fruit Dispatch and the State of Connecticut. Plaintiff alleges that United Fruit and Fruit Dispatch had monopoly control over the supply of bananas and have abused their monopoly power in various unlawful ways, described hereinafter, thereby causing damage to plaintiff.

Plaintiff contends that the evidence sustains the following claims against the defendants:

(1) That the defendants maintained and conspired to maintain an allocation system in the sale of bananas which deprived plaintiff of competitive access to the market;

(2) That as a result of this allocation system, defendants refused to sell plaintiff an adequate supply of bananas to operate its plants at a profit;

(3) That the defendants monopolized and conspired to restrain trade and monopolize—

(a) By fixing and stabilizing prices;

(b) By refusing to sell;

(c) By coercing jobbers to buy during periods of glut;

(d) By granting rebates to certain customers;

(e) By forcing jobbers to accept bananas either greater in quantity or lower in quality than such person would otherwise accept;

(f) By penalizing jobbers because of purchases by them from competitors of defendants;

(g) By dumping bananas in order to fix and stabilize prices;

(h) By selling bananas on the condition or understanding that the jobber will comply with any instructions of the defendant Fruit Dispatch Company as to persons to whom the bananas may be sold by the jobber or the areas in which the jobber may sell the bananas purchased by him;

(i) By allocating bananas;

(j) By refusing to grant competitive access to defendants' banana supply;

(k) By requiring jobbers to buy inferior bananas at first-class prices;

(4) That Fruit Dispatch Company and United Fruit Company, defendants, and Thomas Kalliches, Inc., not a defendant, conspired to refuse to sell bananas or to reduce sales to plaintiff in order to restrain and suppress competition between plaintiff and other jobbers;

(5) That United Fruit Company and Fruit Dispatch Company, defendants, and Canadian Banana Company and Meloripe Company, not defendants, conspired to fix and stabilize prices by dumping bananas. (See Plaintiff's Requested Instructions to Jury, Nos. 3 and 4.)

In substance, the plaintiff has advanced two legal theories upon which to predicate a recovery for but a single set of allegedly illegal practices. The gravamen of plaintiff's action, whether viewed from the standpoint of alleged monopolization or conspiracy is:

(1) Price fixing;

(2) Refusal to sell;

(3) Use of an allocation system which, it is claimed, involved both of the above in such a manner as to preserve defendants' effective market control over both the supply and price of quality green bananas.

The defendants contend, and sought at the trial to prove, that their distribution system did not involve price fixing or any illegal refusal to sell but, on the contrary, represented a legitimate business practice necessitated by the nature of the banana business; that it was established to distribute bananas as equitably as possible among all of defendants' customers during periods of shortage; and that the plaintiff at all times received a fair and equitable share of the available banana supply.

Likewise, the defendants claim and sought to prove that they attained their position of leadership in the banana market by superior skill, efficiency and scientific application. They assert that their dominance, if any, in the banana business was thrust upon them. However, the question is not how the defendants acquired their position of leadership, but, rather, whether that position gave them monopoly control over the market. If so, such dominance may have made otherwise valid business practices actionable. Congress, in the passage of the anti-trust laws, has adopted a policy of control of economic organization and business practice to which all must adhere. The purposes of Congress in passing this legislation was to use its constitutional power "to make of ours, so far as Congress could under our dual system, a competitive business economy." United States v. South-Eastern Underwriters Ass'n, 1944, 322 U.S. 533, 559, 64 S.Ct. 1162, 1177, 88 L.Ed. 1440.

For the purposes of determination of these motions, it appears that there was evidence from which a jury might conclude that during the pertinent three-year period, September 3, 1950 to September 3, 1953, (1) the defendants possessed monopoly power over the supply of quality green bananas in the Connecticut market; (2) the defendants exercised allocation or partial refusal to sell; (3) the defendants fixed prices; (4) the defendants' distribution system was operated in such a manner as to preserve United Fruit's effective market control over both the supply and price of quality green bananas.

By reason of the foregoing considerations with respect to alleged monopolization, dismissal is not appropriate. Consequently, a review by the court of the sufficiency of plaintiff's claims with respect to conspiracy is unnecessary to the decision of the present motions. Accordingly, the discussion which follows is devoted exclusively to a consideration of plaintiff's claims with respect to defendants' alleged monopoly power and the asserted abuse thereof.

Legal v. Illegal Refusal to Sell

In the absence of conspiracy or monopoly, an individual trader has full freedom to refuse to sell to any person for any reason. See United States v. Colgate & Co., 1919, 250 U.S. 300, 307, 39 S.Ct. 465, 63 L.Ed. 992. The exercise of control over customers to protect the seller's goodwill and his product is not illegal per se. It has been said that it is of the essence of competition that the manufacturer or wholesaler should and does have wide freedom in maintaining the quality of his distribution system. See 103 University of Pennsylvania Law Review 847, 859, "Refusals to Deal under Federal Antitrust Law," by Charles F. Barber. Refusals to sell without more do not violate the law. Times-Picayune Publishing Company v. United States, 1953, 345 U.S. 594, 624-625, 73 S.Ct. 872, 97 L.Ed. 1277. A trader or manufacturer has a right to develop its enterprise intelligently by promoting productive business relationships and channels of distribution, while abandoning those which are relatively barren. See Miller Motors, Inc., v. Ford Motor Company, D.C.M.D. N.C.1957, 149 F.Supp. 790, 808-809, affirmed 4 Cir., 1958, 252 F.2d 441.

A single producer in a purely competitive market will ordinarily sell to all comers and is free not to do so if it chooses; but the situation is different when the producer has a substantial degree of monopoly power stemming from comparative size. "Within the limits of his monopoly position the producer can use refusal to sell as a device to influence prices. Moreover he has a weapon with which to extend his power over the market." See 58 Yale Law Journal 1121, "Refusals to Sell and Public Control of Competition."...