Burlington Coat Factory Warehouse v. Belk Bros. Co.

• Decision Date: 16 October 1985
• Docket Number: No. 82 Civ. 3458(LBS).,82 Civ. 3458(LBS).
• Citation: 621 F. Supp. 224
• Parties: BURLINGTON COAT FACTORY WAREHOUSE, Plaintiff, v. BELK BROTHERS COMPANY, Belk Stores Buying Service, Inc., Jantzen, Inc., and White Stag Manufacturing Company, Defendants.
• Court: U.S. District Court — Southern District of New York

621 F. Supp. 224

BURLINGTON COAT FACTORY WAREHOUSE, Plaintiff, v. BELK BROTHERS COMPANY, Belk Stores Buying Service, Inc., Jantzen, Inc., and White Stag Manufacturing Company, Defendants.

No. 82 Civ. 3458(LBS).

United States District Court, S.D. New York.

October 16, 1985.

COPYRIGHT MATERIAL OMITTED

Kassner, Haigney & Thompson, New York City, for plaintiff; Stacy J. Haigney, of counsel.

Donovan Leisure Newton & Irvine, New York City, for defendants Belk Bros. Co. and Belk Stores Buying Service, Inc.; Sanford M. Litvack, of counsel.

Sullivan & Cromwell, New York City, for defendant Jantzen, Inc.; William L. Farris, of counsel.

Kramer, Coleman & Rhine, New York City, for defendant White Stag Mfg.; Howard I. Rhine, of counsel.

ORDER

SAND, District Judge.

OPINION

Plaintiff, Burlington Coat Factory Warehouse ("Burlington") brought this action in May 1982 against the defendants Belk Brothers Company and Belk Stores Buying Service, Inc. (sometimes hereinafter referred to jointly as "The Belk defendants"), Jantzen, Inc. ("Jantzen") and White Stag Manufacturing Company ("White Stag"). Burlington seeks damages based upon alleged violations of the federal antitrust law. Plaintiff alleges that defendants engaged in conduct constituting per se violations of section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, by forming contracts, combinations and conspiracies in restraint of trade for the purpose of (i) fixing and maintaining retail prices charged in the Charlotte, North Carolina area at or about the "keystone" level,¹ (ii) eliminating price competition in the Charlotte area, and (iii) driving Burlington's Charlotte store out of business by reason of its failure to adhere to said unlawful pricing policy. Defendants have moved for summary judgment pursuant to F.R.Civ.P. 56. In addition, defendant White Stag has moved for an award of attorney's fees and expenses pursuant to F.R.Civ.P. 11, section 1927 of the Judicial Code (28 U.S.C. § 1927), and the Court's general equitable powers. For the reasons detailed below, defendants Belk Brothers Company, Belk Stores Buying Service, Inc. and Jantzen are denied summary judgment. However, summary judgment is granted on behalf of defendant White Stag. This Court also grants defendant White Stag's motion for attorney's fees for the period commencing with plaintiff's filing of opposition papers to White Stag's motions.

FACTS

Burlington is a New Jersey corporation that engages under its own name, Mode Craft Fashions, Sharon Sez, Inc. ("Sharon Sez"), and other names, in the wholesale purchase and retail sale of clothing. It operates at sixty-eight retail locations² in the eastern portion of the United States, including a store it owns and operates through a wholly-owned subsidiary in Charlotte, North Carolina. Burlington is characterized as an "off price" retailer or "discounter" in the apparel industry because it follows a consistent policy of charging retail prices below the "key-stone" markup during non-sale periods.³ Burlington attributes its success to its ability to offer first quality, brand-name merchandise at prices which are generally 25% below those charged by its competitors. Crippen Aff. ¶ 13.

Belk Brothers Company ("Belk Brothers") is a North Carolina corporation which owns and operates a chain of retail department stores. Three of Belk Brothers' fashion department stores are located in Charlotte, North Carolina. Furlong Aff. ¶ 2. Belk Stores Buying Services, Inc. ("Belk Services") provides services including merchandising assistance to Belk Brothers and other stores in the "Belk/Leggett" family of stores throughout the southeast. Crippen Aff. ¶ 4. Belk Services does not itself offer merchandise for sale to the public. Nipper Aff. ¶ 2.

Jantzen is a Nevada corporation that designs, produces and markets sportswear and swimwear for men and women. Farris Aff., Ex. C. It has design studios in New York, Los Angeles and Portland and manufacturing plants throughout the United States and Canada. Id. White Stag is an Oregon corporation that manufactures and sells women's sportswear at wholesale. Complaint at ¶ 11.

Belk Brothers is considered the largest retailer of apparel in the vicinity of Charlotte, North Carolina. Crippen Aff. ¶ 4. The procedure whereby Belk Brothers chooses its merchandise involves a list of recommended resources that is circulated among "Belk/Leggett" stores and seasonal trade shows it conducts in the Charlotte Merchandise Mart. Crippen Aff. ¶¶ 5, 7. Both placement on the recommended list and invitations to the seasonal trade shows are considered essential to a given manufacturer's opportunity to sell a large volume of goods to various "Belk/Leggett" stores. Id. at ¶¶ 6, 8. At all relevant times, the "Belk/Leggett" stores have purchased clothing from the manufacturing defendants, Jantzen and White Stag. Complaint ¶ 5.

Jantzen

Burlington opened its Charlotte store in August, 1981. In the following months, it received shipments of apparel purchased from Jantzen and White Stag which it immediately sold at its low retail prices. Complaint ¶ 16. It is undisputed that Burlington obtained its merchandise from Jantzen through purchases under the auspices of Sharon Sez, a New York corporation which leased a women's sportswear department at four of Burlington's locations in New York and New Jersey. Farris Aff., Ex. O. The word "Burlington" was not used in either written or oral communication with Jantzen until November, 1981, but shipping instructions directed shipment to Mode Craft Fashions, the name under which Burlington apparently is known at the wholesale level. Id. White Stag also did its business with Sharon Sez, Mode Craft Fashions, and other "wholly owned subsidiaries of Burlington." White Stag's Memo. of Law, 2. In fact, Burlington has no "Burlington Coat Factory Warehouse" accounts and makes wholesale purchases solely under other names. Haigney Aff., Ex. A.

Burlington's entry into the Charlotte market was accompanied by the regular dispatch of Belk employees to Burlington's store to ascertain brands and prices. See Haigney Aff., Ex. C. In the fall of 1981, Jay H. Crippen, a former Jantzen sales representative in the Charlotte area, received a telephone call from Jantzen's regional sales manager, John Jenkins. Crippen Aff. ¶ 9. Mr. Jenkins informed Mr. Crippen that the merchandise manager for Belk Stores, Edward J. Burke, had telephoned him to inquire as to whether it was Jantzen's policy to sell to "discounters." Id. Mr. Burke had further stated that if Jantzen continued to sell to discounters in the future, Belk Stores would look to other suppliers. Id.⁴

Before Mr. Burke's call, both Mr. Crippen and Mr. Jenkins were unaware that Jantzen merchandise was being sold by Burlington in Charlotte. Id. at ¶ 10. They subsequently learned that the merchandise had been purchased through Jantzen's New York office. Crippen Aff. ¶ 15. Mr. Arthur J. Brennan, Jantzen's men's apparel sales representative, had opened a menswear account in 1978 with Stephen A. Milstein under the auspices of Sharon Sez. Id. See also Farris Aff., Ex. M. Mr. Brennan admittedly failed to conduct the expected inquiry as to the suitability of the account, which would have included a visit to the actual retail outlets prior to filling any of the prospective customer's orders. Farris Aff., Ex. M. However, prior to 1978, Sharon Zellman had been purchasing Jantzen's women's sportswear under the Sharon Sez account. Id. at Ex. H; see also Crippen Aff. ¶ 15. Mr. Brennan advised Mr. Crippen that these women's sportswear sales assured him that the sales in question were not in conflict with any Jantzen policy. Crippen Aff. ¶¶ 15, 29.⁵

The parties disagree as to what prompted subsequent visits to Burlington's retail locations and the exact nature of the information sought from such visits. Burlington alleges that Mr. Burke's telephone call presented Jantzen with the devastating prospect of losing all of its "Belk/Leggett" business, the key to its profitability in the southeast. Crippen Aff. ¶ 10. Burlington further alleges that the sole purpose of an initial visit to its Charlotte store in the fall of 1981 was to ascertain Burlington pricing policies, id. at ¶ 10, and that the nature or appearance of the store was irrelevant. Id. at ¶ 11.

Jantzen alleges that a substantially large order in October, 1981, from Sharon Sez prompted an inquiry by Mr. Brennan. Farris Aff., Ex. M. Mr. Brennan realized through several phone calls and a visit to the account's Paramus, New Jersey store that Mode Craft was really Burlington Coat Factory Warehouse. Id. Prior to this order, Jantzen had continually shipped to Sharon Sez and Mode Craft and these accounts respectively had maintained a good credit standing. Id.⁶

Jantzen management in Portland, Oregon followed up in early 1982 by asking for written reports on each of plaintiff's stores. Ludeman Aff. ¶ 6. Mr. Don W. Fish, the now deceased National Sales Manager who ordered these reports, made a decision to terminate the Sharon Sez account because the Burlington stores did not satisfy Jantzen's customer criteria. Id.⁷ Jantzen maintains that it wants its apparel sold in department and specialty stores "that through reputation, fashion advertising and such amenities as attractive displays and fixtures, present Jantzen apparel as fashion rather than commodity." Id. at ¶ 4. Its only exception to this policy involves areas where such retail stores do not exist or in which Jantzen has been unsuccessful in establishing its lines. Id. at ¶ 5. Burlington, which described itself as a "factory warehouse" and adhered to a "no frills" approach in presenting its merchandise, id. at ¶ 6, did not fulfill Jantzen's distributional objectives.

Burlington alleges that the quality of Burlington's stores had nothing to do with either these subsequent visits or its ultimate termination. On January 28, 1982, Mr. Steven Koster, the Burlington buyer in charge of the...