Burke v. Ford, 8662.

• Decision Date: 15 May 1967
• Docket Number: No. 8662.,8662.
• Citation: 377 F.2d 901
• Parties: Kenneth A. BURKE, dba Ranch Acres Liquors, J. A. Chandler, Jr., dba Chandler Retail Liquors, William E. Manley dba Twenty-First & Harvard Liquor Store, Jesse B. Renick dba Pennington Hills Liquor Store, Sarah Simpson Keel dba Warehouse Liquor Store, and C. J. Wright, Jr., dba Wright's Beverage Store, Appellants, v. Clarence FORD and Frank J. Kunc, dba All Brands Sales Company et al., Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

377 F.2d 901 (1967)

Kenneth A. BURKE, dba Ranch Acres Liquors, J. A. Chandler, Jr., dba Chandler Retail Liquors, William E. Manley dba Twenty-First & Harvard Liquor Store, Jesse B. Renick dba Pennington Hills Liquor Store, Sarah Simpson Keel dba Warehouse Liquor Store, and C. J. Wright, Jr., dba Wright's Beverage Store, Appellants, v. Clarence FORD and Frank J. Kunc, dba All Brands Sales Company et al., Appellees.

No. 8662.

United States Court of Appeals Tenth Circuit.

May 15, 1967.

Robert S. Rizley, Tulsa, Okl., for appellants.

Irvine E. Ungerman and James L. Kincaid, Tulsa, Okl. (William Leiter, Tulsa, Okl., and David C. Johnston, Jr., Oklahoma City, Okl., with them on brief), for appellees.

Before MURRAH, Chief Judge, and BREITENSTEIN and HILL, Circuit Judges.

MURRAH, Chief Judge.

A group of Oklahoma liquor retailers brought this suit to enjoin an alleged market division violation of § 1 of the Sherman Act, 15 U.S.C. § 1. The retailers alleged that the sixteen Oklahoma wholesalers conspired to and did in the early part of 1964 divide the Oklahoma wholesale liquor market, both territorially and according to brands. Specifically, it was alleged that the defendants conspired to unlawfully divide the wholesale market in alcoholic beverages transported in a continual flow of interstate commerce from other states into Oklahoma for resale to Oklahoma retailers and ultimately to the Oklahoma consuming public. There was also language in the complaint which could be taken as an allegation that even if the interstate movement of alcoholic beverages terminated at the wholesale warehouse, the conspiracy nevertheless adversely affected the free flow of interstate trade and commerce in the commodity. Trial was to the court. Judge Bohanon found that there had been a division of brands and territories. But, he also found that the evidence fell short of proving an unlawful conspiracy or understanding to divide those brands and territories; that the Sherman Act prerequisite involvement with interstate commerce was also lacking; that since in any event market division had admittedly ceased by the time of trial there were no acts or threatened acts to enjoin and the matter of an injunction was, therefore, moot.¹ Judgment was entered for the wholesalers. We affirm on the sole ground that the proof was entirely insufficient to show that the activities complained of were in or adversely affected interstate commerce.

Some exposition of the market division found by the trial court may provide helpful background to our consideration of the interstate commerce issue. The record reveals that during most of 1964 the wholesalers confined themselves to selling within more or less well defined geographical areas and that within those areas they confined themselves, at least insofar as the leading brands of liquor are concerned, to selling certain labels. More specifically, it appears that the six wholesalers from Oklahoma City sold in one area, the six from Tulsa in a second, the two from Lawton in a third and the two from Ponca City and Enid in a fourth. In the latter two areas the brands were fairly evenly divided between the two wholesalers operating in each; in the former two areas, serviced by six wholesalers, the brands were usually divided three ways so that within the area any one brand was carried by only two wholesalers. There may have been occasional voluntary deviations from this mode of operation, but the "voluntary franchise" system, as it became popularly known and as we have set it out, was the normal manner of doing business during the period in question. This mode of operation ceased in November or December of 1964 about the time two other wholesalers commenced operation and also about the time this case was nearing trial.

Addressing ourselves to the threshold question of interstate commerce, we consider first the retailers' primary contention based on the alleged "in commerce" or continuous flow theory of their case. The retailers point out that all alcoholic beverages² consumed in Oklahoma are imported from out of state³, and argue that the liquor passes from distiller to wholesaler to retailer to consumer in one continuous flow; that not until it reaches the consumer does the flow terminate; and that, therefore, the alleged conspiracy to divide the wholesale market operated upon the goods while still in interstate commerce. The trial judge held otherwise. He referred to the statutes regulating the Oklahoma liquor industry, 37 O.S. 1961, §§ 501-570, and the implementing rules and regulations of the Oklahoma Alcoholic Beverages Control Board under which liquor coming from out of state is required to be received into the wholesale warehouse where it is subject to strict inventory reporting requirements and where it remains for varying lengths of time until shipped out pursuant to retail order. From this he concluded that interstate commerce in the alcoholic beverages ended when they came to rest in the wholesale warehouse and subsequent transfers were in intrastate commerce.

It cannot be doubted that liquor consumed in Oklahoma remains for varying lengths of time in the wholesale warehouse. The question, as we shall see, is whether its interstate movement ends there or whether this coming to rest is but a temporary stopover in a continual flow of commerce which terminates at some point further down the distribution line.

We hold that the decision on the in commerce issue is controlled by Walling v. Jacksonville Paper Company, 317 U.S. 564, 63 S.Ct. 332, 87 L.Ed. 460. Although that was a Fair Labor Standards Act case, it is basic that the reach of the Sherman Act and the Fair Labor Standards Act is coextensive insofar as the regulation of goods moving in commerce is concerned — in enacting both statutes Congress exerted the full measure of its in commerce powers. Cf. Walling v. Jacksonville Paper Company, supra, and Kirschbaum Co. v. Walling, 316 U.S. 517, 62 S.Ct. 1116, 86 L.Ed. 1638, with United States v. Frankfort Distilleries, 324 U.S. 293⁴, 65 S.Ct. 661, 89 L.Ed. 951.

Mr. Justice Douglas in Walling described the fullness of the exertion of the congressional power to regulate goods moving in interstate commerce by declaring that

"* * * once the goods enter the channels of interstate commerce, there is no indication that Congress stopped short of control over the entire movement of them until their interstate journey was ended. No ritual of placing goods in a warehouse can be allowed to defeat that purpose. The entry of the goods into the warehouse interrupts but does not necessarily terminate their interstate journey. A temporary pause in their transit does not mean that they are no longer `in commerce\' within the meaning of the Act. * * * if the halt in the movement of the goods is a convenient intermediate step in the process of getting them to their final destinations, they remain `in commerce\' until they reach those points. Then there is a practical continuity of movement of the goods until they reach the customers for whom they are intended. That is sufficient. Any other test would allow formalities to conceal the continuous nature of the interstate transit which constitutes commerce."

The retailers adopt this language as a charter for their lawsuit and contend that there is a "practical continuity of movement" of the liquor until it reaches the Oklahoma consumer for whom it is intended; that the temporary stoppage of the liquor in the wholesale warehouse is only a convenient intermediate step in its contemplated interstate movement. But, Mr. Justice Douglas did not stop with his basic statement of principles which as a general statement does support the retailers position. He proceeded to particularize in three categories the special circumstances under which goods moving from out of state to an in state wholesaler for redistribution in state may be said to have the requisite practical continuity of an interstate movement. Included are goods purchased by wholesalers (1) to fill a special order, (2) under a contract or understanding by which the wholesaler has agreed to fill the needs of a particular customer, or (3) to fill the anticipated needs of a particular customer although no contract or understanding to do so exists. The evidence was clear in Walling that the respondent handled certain goods coming within the first two categories, and the court held that employees working on such goods were covered by the Act. But, crucially apropos our case, the court found the evidence insufficient to show that another mass of goods fell within the third category, i. e. goods purchased without a contract or understanding but in anticipation of the needs of a specific customer. As to these controversial goods, the court thought the evidence was "* * * of a wholly general character and lacked that particularity necessary to show that the goods in question were different from goods acquired and held by a local merchant for local disposition."

A number of later cases relied upon by the retailers are entirely compatible with Walling. Thus in United States v. Chrysler Corp. etc., 9 Cir., 180 F.2d 557, the court, citing and quoting from Walling, held the indictment legally sufficient to bring wholesale transactions in certain goods within the first two Walling categories; as to other transactions, the indictment was thought not clearly sufficient to bring them within the third Walling category. The court proceeded to determine whether it was sufficiently alleged that these latter transactions adversely affected commerce so as to bring them within the scope of the Sherman Act. See also United States v. South Florida Asphalt Co., 5 Cir., 329 F.2d 860. Heavy reliance is placed on Las Vegas Merchant Plumbing Ass'n v. United States, 9 Cir., 210 F.2d 732. In that case the indictment alleged a conspiracy to restrain the free flow of goods in commerce and alternatively alleged that if the activities were purely...