Bowl America Incorporated v. Fair Lanes, Inc.

• Decision Date: 09 June 1969
• Docket Number: Civ. No. 18093.
• Citation: 299 F. Supp. 1080
• Parties: BOWL AMERICA INCORPORATED, Bowl America Odenton, Inc., Dundalk Ten Pin Bowl, Inc., Bowl America Cedonia, Inc., Glen Burnie Ten Pin Bowl, Inc., Reisterstown Bowl, Inc., Glen Burnie Bowl, Inc., B. A. Restaurant, Inc., N. A. Bowl, Inc., Bowlers Restaurant, Inc., all bodies corporate duly incorporated under the laws of the State of Maryland. v. FAIR LANES, INC., Fair Lanes Colt Properties, Inc., Colt Lanes Holding Company, Inc., Sidney M. Friedberg and R. Stuart Armiger.
• Court: U.S. District Court — District of Maryland

299 F. Supp. 1080

BOWL AMERICA INCORPORATED, Bowl America Odenton, Inc., Dundalk Ten Pin Bowl, Inc., Bowl America Cedonia, Inc., Glen Burnie Ten Pin Bowl, Inc., Reisterstown Bowl, Inc., Glen Burnie Bowl, Inc., B. A. Restaurant, Inc., N. A. Bowl, Inc., Bowlers Restaurant, Inc., all bodies corporate duly incorporated under the laws of the State of Maryland. v. FAIR LANES, INC., Fair Lanes Colt Properties, Inc., Colt Lanes Holding Company, Inc., Sidney M. Friedberg and R. Stuart Armiger.

Civ. No. 18093.

United States District Court D. Maryland.

May 6, 1969.

Supplemental Opinion June 9, 1969.

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Stanley H. Wilen, Burke, Gerber & Wilen, Baltimore, Md., Wm. Warfield Ross, Donald H. Green (Joel E. Hoffman and Alexander W. Sierck, on the brief), Wald, Harkrader & Rockefeller, Washington, D. C., for plaintiffs.

Arthur Machen, Jr., Venable, Baetjer & Howard, Baltimore, Md., Victor H. Kramer, Bruce L. Montgomery, Arnold & Porter, Washington, D. C., for defendants.

THOMSEN, Chief Judge.

This private antitrust action under 15 U.S.C.A. § 15 seeks damages and injunctive relief against the largest chain of bowling establishments in Metropolitan Baltimore based upon alleged anticompetitive activities, principally in 1964, when defendants acquired the eight bowling establishments of its then-largest competitor. Those acquisitions—together with related acts claimed to have had the purpose and effect of restraining or destroying competition, and of injuring plaintiffs as potential and actual competitors of defendants in the operation of bowling establishments—are charged as violations of §§ 1 and 2 of the Sherman Act,¹ 15 U.S.C.A. §§ 1, 2, section 7 of the Clayton Act, 15 U.S.C.A. § 18, and the common law of Maryland.

The following terms will be used in this opinion:

"Bowl America" to mean Bowl America, Inc., together with its wholly-owned subsidiaries, including all plaintiffs in this case;

"Fair Lanes" to mean Fair Lanes, Inc., together with its wholly-owned subsidiaries, including the corporate defendants;

"Defendants" to mean all defendants, individual as well as corporate;

"Bowling establishments" to mean any facility for tenpin or duckpin bowling open to the public, together with related facilities for serving food, selling bowling supplies, etc.;

The "bowling business" to mean the operation of one or more bowling establishments;

"Metropolitan Baltimore" to mean the area from the center of the City of Baltimore to eight miles beyond the Baltimore Beltway;

The "five Bowl America establishments" to mean the houses at Cedonia, Dundalk, Glen Burnie, Odenton and Reisterstown, which were operated by Bowl America until July 1963 and again after June 1964;

The "three Colt establishments" to mean the Colt houses at Dundalk, Towson and Woodlawn;

The "Colt Chain" to mean the three Colt establishments, and the five Bowl America establishments during the period in 1963-64 when they were operated by the Colt organization;

"The Colt organization" to mean: (1) Colt Lanes, Inc., controlled by George E. Banks, III, in 1963, which owned (2) the corporations which operated the several Colt establishments; (3) Colt Realty Inc., controlled by Banks, which owned, subject to mortgages, the leasehold interest in the real estate and had a substantial investment in the buildings occupied by the three Colt establishments; and (4) Colt Pinsetter Company, a partnership controlled by Banks, which owned an interest in and leased pinsetting equipment to the operating companies of the three Colt establishments;

"Bowling equipment" to mean pinsetting equipment, bowling lanes, scoring devices, seats, furniture, carpeting and snack bar equipment;

"Bowling supplies" to mean pins, balls, shoes, bags and trophies;

"Modern bowling establishments" to mean large, brightly-lighted, air conditioned, carpeted, free-span structures with elaborate automated machinery for pinsetting, ball-returns and scoring. They usually provide restaurants, nurseries for infants, and spacious parking areas. Some modern establishments provide only tenpin lanes, some only duckpin lanes, and some both.

"Lineage" to mean the total number of games bowled by all bowlers.

Historical Facts²

Bowlers, whether duckpin or tenpin, fall into two categories: "casual" and "league". League teams usually bowl each week at scheduled times pursuant to agreements with the establishments ("league contracts").³ The operation of bowling establishments is a seasonal business, with a decline in the late spring and summer months. Air conditioning has mitigated but not eliminated this characteristic.

Fair Lanes began operating bowling establishments in 1923 in Baltimore, and grew over the years by building new establishments and acquiring existing ones. It has always been the leader in the number of establishments, lanes and lineage in Metropolitan Baltimore. It has repeatedly characterized itself as "dominant", as well as "preeminent" and "leading". Its officers, including the individual defendants, have repeatedly sought to bar, discourage or drive out others trying to enter those areas in the Metropolitan Baltimore bowling market which Fair Lanes wished to appropriate for itself. Fair Lanes has also extended its activities to other markets, including Metropolitan Washington and North Carolina.

In 1959 and 1960 there was a bowling boom in the United States. Many modern bowling establishments were built and chain operations became common. Most of the modern establishments in Metropolitan Baltimore were built in the suburbs near the Beltway between 1959 and 1962. The increasing mobility of society, reflected in part by the Beltway, broadened the geographic area from which bowling establishments drew their customers.

Bowl America entered the bowling business in 1959 in Metropolitan Washington. Between 1960 and 1962, it built five modern bowling establishments in Metropolitan Baltimore. At about the same time, three modern establishments were built in Metropolitan Baltimore by the Colt organization. In May 1963 Fair Lanes was first, Bowl America second, and Colt third in the operation of bowling establishments in Metropolitan Baltimore.

The bowling business peaked around 1961, slumped badly in 1962 and continued to decline for several years thereafter. Too many bowling establishments had been built too fast. Brunswick and AMF, the principal suppliers of bowling equipment, had been very liberal in their credit policies and took severe losses. Repossessions and bankruptcies occurred with increasing frequency. Fair Lanes' financial resources gave it the power to acquire competitors whose finances were insufficient to carry them through depressed periods, and it made the exercise of that power a policy of its business.

Early in 1963 Fair Lanes negotiated with Banks, hoping to acquire the three Colt establishments. Banks, however, decided to expand his operations and proposed to Bowl America that the Colt organization acquire the five Bowl America establishments in Metropolitan Baltimore. Those establishments, as a group, had never operated at a profit, and Banks' desire to expand the Colt operation coincided with Bowl America's wish to ease its cash shortage.

Accordingly, on May 15, 1963, Bowl America agreed to transfer to Colt Realty, Inc., or its designees, the assets and liabilities of the five Bowl America establishments. Colt Realty agreed: (a) to pay $233,350.08,⁴ of which $85,000 was to be paid at settlement and the balance over a period of time; (b) to pay all future liabilities under the real estate leases of the five establishments; (c) to produce a certified balance sheet showing that its net worth was at least $500,000; and (d) to obtain, before the settlement, releases from four of the five Bowl America landlords, relieving Bowl America from further liability to those landlords, or, alternatively, to provide Bowl America with a $200,000 second mortgage on the three original Colt leaseholds.⁵

Shortly thereafter Banks told plaintiffs that he had been unable to arrange the second mortgage. He proposed, as a temporary measure of security, in lieu of the releases and mortgages, that he, his wife and Colt Realty would sign an agreement personally to indemnify Bowl America in the event any liability on the leases was enforced against Bowl America. That assurance was accepted.

On July 1, 1963, the five Bowl America establishments were taken over by five subsidiaries of Colt Lanes, Inc., as designees of Colt Realty. The $85,000 was paid to Bowl America and it made current all obligations of the five establishments. Bowl America was released by Brunswick and AMF, among others, from primary liability on a number of conditional sales contracts for bowling equipment in the five Bowl America establishments, but it never received either the releases from the Bowl America landlords, or a second mortgage on the Colt leaseholds. Nor did Bowl America ever receive the promised certified balance sheet, or make any inquiries of Colt Realty or Banks concerning Colt Realty's ability to pay its obligations as they became due.⁶

Until early in 1964 Banks, although frequently late, met the obligations of the five Bowl America establishments, except state taxes. In February 1964 Bowl America's president met with Banks. Notwithstanding Banks' continued failure to obtain releases to Bowl America from the landlords, Colt's increasing defaults, and Bowl America's awareness that Banks himself was in financial difficulties, Bowl America agreed not to "move in and throw him out". Banks in turn tentatively agreed to provide Bowl America with a second mortgage on the Colt establishment in Dover, Delaware, but he never provided that mortgage. After the February 1964 meeting, the defaults of Banks and his companies continued and worsened. The books of original entry for the Colt chain contain no entries after January 1964.

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