Carpa, Inc. v. Ward Foods, Inc.
| Decision Date | 28 July 1976 |
| Docket Number | No. 75-1206,75-1206 |
| Parties | , 1976-2 Trade Cases 60,995 CARPA, INC., et al., Plaintiffs-Appellees-Appellants, v. WARD FOODS, INC., et al., Defendants Third-Party Plaintiffs Appellants-Appellees, v. Bill G. MARTIN et al., Third-Party Defendants-Appellants-Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
George H. Kolb, Joe B. Harrison, Dallas, Tex., Seagal Wheatley, San Antonio, Tex., for Ward Foods, Inc., and others.
Jack Hebdon, San Antonio, Tex., for Bill G. Martin, and others.
Charles L. Stephens, Ft. Worth, Tex., for Bill G. Martin.
Ralph G. Langley, William T. Armstrong, III, San Antonio, Tex., for Carpa, Inc., and others.
Appeals from the United States District Court for the Western District of Texas.
Before GEWIN, COLEMAN and DYER, Circuit Judges.
This is a private Sherman Act antitrust lawsuit. It was brought by three plaintiffs: (1) franchisee Payne; (2) his solely owned shell corporation, Carpa, which succeeded to the franchise; and (3) Boone. Payne had been a close personal friend of one of the defendants, Bill Martin, for thirty years. Boone was Martin's brother-in-law. The other defendant, Ward Foods, Inc., had bought Martin's operations in 1968.
Boone and Payne, heavily indebted to Martin and his companies, got a jury verdict and treble damages for economic injuries allegedly caused by the imposition of illegal tying arrangements in connection with the operation of Zuider Zee restaurants in Austin and San Antonio. In a bifurcated, oddly conducted, seven week trial, the issue of liability was tried to a jury in morning sessions of the district court, while the matter of damages was heard by the special master in the afternoons. Upon its verdict of a Sherman Act violation, the jury assessed the damages (before trebling) as found by the Special Master, having heard no other evidence on that issue. Attorneys for the plaintiffs were awarded attorneys' fees in the sum of $202,380.
The appeal, dealing with multiple plaintiffs and defendants, concerning the operation of Zuider Zee restaurants in two Texas cities, has handed us a 72 volume trial record, a complex thicket of factual disputes, and difficult aspects of antitrust law, complicated by the unusual trial procedure.
We affirm as to liability. We hold that Boone was not entitled to recover $15,000 for lost investment. In all other respects, the judgment of the District Court is affirmed.
This case had its genesis in 1957 when Bill Martin opened a seafood restaurant in Fort Worth by the name of "Zuider Zee". Eventually, the facility was relocated and expanded to seat 400 people. Three similar restaurants were built in Dallas and Arlington, Texas. All four establishments, as well as the registered trademark "Zuider Zee", were owned by Zuider Zee Oyster Bar, a corporation, the sole stockholders of which were Martin and his family. Great Southwest Wholesale Fish and Oyster Company, Inc. was created by Martin in 1962 as a warehouse supplier of seafood products, primarily to furnish items of the kind and quality required by the Zuider Zee operation.
In 1965 Rodger Loter, who had been impressed by the quality and overwhelming success of the Zuider Zee restaurants, approached Martin requesting a Zuider Zee franchise for Lubbock, Texas. This was the first franchise. Two additional agreements were signed in 1966 with other parties for restaurants in Oklahoma City and Colorado Springs. In 1967 Loter secured a franchise for Amarillo, Texas. By 1967 there were thus four Zuider Zee franchises outstanding.
In early 1967 plaintiff Payne's son, Boots, asked his brother-in-law, who was Bill Martin's attorney, to aid him in securing a franchise from Martin. Boots met personally with Martin soon thereafter, but the latter refused to grant the franchise unless Boots' father joined the venture. The Paynes originally wanted a franchise for a restaurant in Tulsa, but that city was already under option to another individual. Martin informed them that there would be a restaurant available in Kansas City sometime in the indefinite future, and that San Antonio might soon be available because the individual who owned the option there had failed to exercise it. The negotiations culminated in a contract of March 29, 1967, between Zuider Zee Oyster Bar, Inc., and Calvin Payne, granting "a preferential right to obtain a Zuider Zee restaurant in San Antonio, Texas".
At the time this agreement was reached Martin had already drawn plans for the San Antonio restaurant, had begun ordering equipment, and had borrowed $100,000 to begin construction. Until the Paynes decided to accept the San Antonio site, Martin had anticipated building a restaurant there which would belong to the corporation or to its profit sharing trust. Payne secured the San Antonio option with the proviso that if he were unable to sell his pet food company on or before September 1, 1967, "for a price fairly commensurate with and representing a fair market value", he would have the right to a refund of all monies expended by him in connection with the franchise or construction of the restaurant. The option contract, in conjunction with a letter agreement of June 20, 1967, guaranteed this right and provided that if at any time prior to September 1 Payne elected to be a franchisee in San Antonio, "he shall execute a franchise agreement acceptable to both parties. . . ." The restaurant opened on July 7, 1967, but neither the formal franchise nor the lease agreement for the physical premises had been executed.
Payne testified that he signed a franchise agreement around the 1st of September of 1967, but the only agreement in the record is one executed on April 3, 1968. Sometime in 1968 Payne learned that Martin was about to sell his Zuider Zee interests to Ward Foods, Inc. To protect his franchise, and the lease on the restaurant premises, Payne executed the franchise agreement and lease on April 3, signing as president of Carpa. Carpa was Payne's solely owned shell corporation, organized on the same date, to which he transferred his restaurant assets. On April 5, 1968, the sale to Ward of Zuider Zee Oyster Bar, Great Southwest, and Martin's advertising company was reduced to written agreement and became effective April 16, 1968.
In January of 1967, Boone agreed to leave his managerial position in the cafeteria of Abilene Christian College to go to work for his brother-in-law's operation in Dallas. In June an oral agreement was reached that Boone was to receive a Zuider Zee franchise in Austin. Construction was begun about the same time, but Boone advanced no money for a franchise fee or for equipment until December. Boone's monetary backing for the operation came via a $125,000 loan from the Austin National Bank, guaranteed by Martin. The Austin restaurant opened on April 15, 1968, and the written franchise agreement was executed about the same time. No written lease agreement to the restaurant premises was ever signed.
Boone closed his restaurant on December 23, 1972 but refused to give Martin possession, which had to be obtained by court order.
The Zuider Zee franchise agreement which constitutes the core of this antitrust action contains certain uniform clauses requiring franchisees to purchase all food, supplies, and equipment from Martin's affiliated corporation. The provisions of the agreement with which we are primarily concerned are as follows 1. FRANCHISE. Franchisor hereby grants to Franchisee an exclusive, nontransferable and personal license to use the tradename and trademark "Zuider Zee" in the operation of a restaurant at the location described in Exhibit A, . . . upon the terms and conditions herein set . . .
2. CONSTRUCTION AND EQUIPMENT. . . . All interior design and selective, decorative or aesthetic installation of partitions . . . , shelving, stations, planters, cash register stands, designs, fixtures, furnishings and equipment (new or replacement) shall be purchased, designed and/or constructed by Franchisor or its duly authorized agent. Franchisee hereby agrees that on any item, encompassed within the above, installed or acquired without the written consent of Franchisor, there will be paid to Franchisor twenty (20%) per cent of Franchisor's appraisal value which value will be determined by Franchisor reasonable and upon what the same or similar item or items would have cost Franchisor should Franchisor have been allowed to install same as required by this agreement.
5. OPERATION AND MANAGEMENT. . . . Franchisee agrees to buy all of its food products and supplementary items through Franchisor, at the same cost as all Fort Worth-Dallas area restaurants are then currently paying, from Great Southwest Wholesale Fish and Oyster Company, Inc., or its appointed food dealer or distributor. Franchisee agrees to buy all of its fixtures, furnishings and equipment from Great Southwest Wholesale Fixture Company, a division of Great Southwest Wholesale Fish and Oyster Company, Inc., or its appointed representative or dealer, at the same cost as all Fort Worth-Dallas area restaurants are then currently paying or would pay plus all freight and applicable shipping costs.
13. TRADEMARK. Franchisee acknowledges that the words "Zuider Zee" are a valid registered trademark owned by Franchisor and that Franchisor has the sole right (subject to licenses it may have granted) to use such trademark and the trade name "Zuider Zee" and that valuable good will is attached to such trademark and such trade name. Franchisee will use such trademark and such trade name only in the manner and to the extent specifically permitted by this agreement.
17. FRANCHISOR'S RIGHT TO TERMINATE. Franchisor shall have the right to terminate this agreement upon notice in writing to Franchisee . . . upon the occurrence of any of the following events:
(b) In the event Franchisee defaults in the performance of any...
To continue reading
Request your trial
-
Aspen Highlands Skiing Corp. v. Aspen Skiing Co., s. 82-1407
...2108, 2110, 77 L.Ed.2d 313 (1983); Moore v. Jas. H. Matthews & Co., 682 F.2d 830, 839 & n. 11 (9th Cir.1982); Carpa, Inc. v. Ward Foods, Inc., 536 F.2d 39, 55-56 (5th Cir.1976); see generally 2 S. Speiser, Attorneys' Fees Sec. 14:6 (1973). The Supreme Court in Perkins indicated that "[t]he ......
-
General Business Services, Inc. v. Rouse
...supplies from other suppliers, in particular Rouse. Rouse cites the following cases in support of his assertion: Carpa, Inc. v. Ward Foods, Inc., 536 F.2d 39 (5th Cir. 1976); Warriner Hermetics, Inc. v. Copeland Refrigeration Corp., 463 F.2d 1002 (5th Cir. 1972); Siegel v. Chicken Delight, ......
-
Kentucky Fried Chicken Corp. v. Diversified Packaging Corp.
...Inc. v. United States Steel Corp., 394 U.S. 495, 89 S.Ct. 1252, 22 L.Ed.2d 495 (1969); Northern Pacific, supra ; Carpa, Inc. v. Ward Foods, Inc., 536 F.2d 39 (5th Cir. 1976). The problem in the case at bar is to determine whether Kentucky Fried's arrangement is in fact a tie i. e., whether ......
-
Consol. Gas Co. of Fla. v. City Gas Co. of Fla.
...both of these types of damages. See Eiberger v. Sony Corp. of America, 622 F.2d 1068, 1081 (2d Cir.1980); Carpa, Inc. v. Ward Foods, Inc., 536 F.2d 39, 51 (5th Cir.1976), overruled on other grounds, Copper Liquor, Inc. v. Adolph Coors Co., 701 F.2d 542 (5th Cir.1983); Atlas Building Product......
-
Antitrust Law
...1476, 1482 (9th Cir. 1983) (franchise and bookkeeping services could be considered to be two products); Carpa, Inc. v. Ward Foods, Inc., 536 F.2d 39, 43 (5th Cir. 1976) (franchise agreement contained clauses requiring “franchisees to purchase all food, supplies, and equipment” from affiliat......
-
Tying and bundled discounts
...1976) (concluding that franchise license and trademark were separate from the tied dry cleaning equipment); Carpa, Inc. v. Ward Foods, 536 F.2d 39, 45-47 (5th Cir. 1976) (concluding that restaurant trademark was a separate product from tied food and supplies.); Susser v. Carvel Corp., 332 F......
-
Sourcing Restrictions and Vendor Rebates
...Son v. All 14. See, e.g. , Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430, 433-34 (3d Cir. 1997); Carpa, Inc. v. Ward Foods, 536 F.2d 39, 45-46 (5th Cir. 1976). 15. 332 F.2d 505 (2d Cir. 1964). 16. Id . at 512. 17. See, e.g. , Krehl v. Baskin-Robbins Ice Cream Co., 664 F.2d 13......
-
Table of Cases
...1980), 52 Carlo C. Gelardi Corp. v. Miller Brewing Co., 502 F. Supp. 637 (D.N.J. 1980), 75 Table of Cases 195 Carpa, Inc. v. Ward Foods, 536 F.2d 39 (5th Cir. 1976), 131 Cascade Health Solutions v. PeaceHealth, No. 05-35627, 2008 WL 269506 (9th Cir. Feb. 1, 2008), 85 Casey v. Diet Ctr., 590......