Century Hardware Corp. v. Acme United Corp.

• Decision Date: 28 February 1979
• Docket Number: No. 77-C-316.,77-C-316.
• Citation: 467 F. Supp. 350
• Parties: CENTURY HARDWARE CORPORATION, Plaintiff, v. ACME UNITED CORPORATION, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

467 F. Supp. 350

CENTURY HARDWARE CORPORATION, Plaintiff, v. ACME UNITED CORPORATION, Defendant.

No. 77-C-316.

United States District Court, E. D. Wisconsin.

February 28, 1979.

COPYRIGHT MATERIAL OMITTED

Michael, Best & Friedrich by David J. Cannon, Milwaukee, Wis., for plaintiff.

Foley & Lardner by Robert Christensen, Michael A. Bowen, Milwaukee, Wis., for defendant.

DECISION AND ORDER

MYRON L. GORDON, District Judge.

A bench trial was held in this action on January 11, 1979. The matter is before me for the resolution of the merits on the basis of certain stipulated facts, the evidence adduced at trial and the parties' briefs. The following decision constitutes my findings of fact and conclusions of law pursuant to Rule 52(a), Federal Rules of Civil Procedure.

This is an action under the Robinson-Patman Act, 15 U.S.C. § 13, charging unlawful price discrimination, and under the Wisconsin Fair Dealership Law, Chapter 135, Wis. Stats., alleging an improper termination of a dealership agreement between the parties. The plaintiff seeks damages and equitable relief in connection with both causes of action. Jurisdiction over the Robinson-Patman claim is conferred by 28 U.S.C. § 1337 and 15 U.S.C. §§ 15, 22 and 26. Jurisdiction over the Wisconsin Fair Dealership Law claim is conferred by 28 U.S.C. § 1332, there being diversity of citizenship and allegations of the requisite amount in controversy, and under the doctrine of pendent jurisdiction.

The plaintiff is a Wisconsin corporation with its offices and principal place of business in Milwaukee, Wisconsin. It is engaged in the wholesale hardware business.

The defendant is a corporation with its principal place of business in Connecticut. The defendant manufactures scissors and sells them to the plaintiff and others in Wisconsin, who resell them to schools, school boards and other customers.

For a period of over 20 years, the defendant has maintained a customer classification called "distributor of school supplies." (Hereinafter "distributors"). Distributors specialize in selling arts and crafts supplies to schools. Such distributors are entitled to receive a 5% discount or promotional allowance off the regular jobber's prices when they purchase certain school supplies. It is agreed that the 5% discount gives distributors a competitive advantage over other customers who purchase the defendant's products at the regular jobbers' prices.

The specific products in question are scissors and shears used by schools. At all pertinent times, there were six designated distributors in the relevant market, Wisconsin and Upper Michigan. The plaintiff was not one of them. The two major distributors by volume, Sax Arts & Crafts and Valley Schools Suppliers, Inc., had been receiving the 5% discount for at least 20 years prior to 1977 based on an oral agreement with the defendant.

The plaintiff sells a large range of hardware items. It does a substantial amount of business with schools throughout the state of Wisconsin. In addition to scissors, items sold to schools by the plaintiff vary from plumbing supplies to shop tools; in the words of Mr. Gendelman, the plaintiff's president, it sells "anything and everything" needed by schools. The plaintiff's business with the Milwaukee schools alone involves over 1,000 bids a year and amounts to nearly $250,000 per year.

Although the plaintiff has sold the defendant's products for several years, no consideration was given by the defendant as to whether the plaintiff should be designated as a distributor and thus become eligible for the 5% discount until November, 1976. At that time, Mr. Gendelman telephoned Mr. Farrington, the defendant's vice president of marketing, and informed him that the plaintiff was being underbid by competitors for sales of scissors to schools. Mr. Farrington stated that this was probably because the plaintiff was not a distributor of school supplies. Mr. Gendelman argued that the plaintiff should be considered a distributor of school supplies, and Mr. Farrington stated that he would investigate the plaintiff's eligibility for that status.

Mr. Farrington testified that as a result of Mr. Gendelman's phone call, the defendant reevaluated its discount system and decided to substitute written agreements with its distributors for the existing oral agreements. On or about January 1, 1977, the defendant circulated to the six designated distributors who had been receiving the 5% discount a letter announcing the 5% promotional allowance on certain school supply items for school-line distributors. A form agreement entitled "agreement to provide promotional services" was enclosed. Neither the letter nor an agreement was sent to the plaintiff, and the requirements for eligibility for distributor status were not explained nor offered to the plaintiff until February 11, 1977, when Mr. Farrington wrote to Mr. Gendelman informing him why the defendant did not consider the plaintiff a distributor of school supplies. A copy of the new standard agreement used for distributors was enclosed.

On April 11, 1977, Mr. Gendelman executed the agreement to provide promotional services and returned it to the defendant the following day. Although the agreement recites on its face that "A copy of our latest catalog is submitted herewith," no catalog was submitted by the plaintiff.

On April 26, 1977, Mr. Farrington wrote to the plaintiff and informed it that it was not eligible for classification as a distributor because it failed to submit a copy of its latest catalog and because there was no evidence that the plaintiff was maintaining a stock of school supplies manufactured by the defendant.

Wisconsin Fair Dealership Law

The plaintiff attempted to show that the defendant violated the Wisconsin Fair Dealership Law, Chapter 135, Wis.Stats., by cancelling what it claims to be an "agreement" whereby the plaintiff would be a distributor of the defendant's school supplies and entitled to the 5% discount.

Section 135.03 provides that a grantor of a dealership may not terminate the dealership agreement without good cause, and section 135.04 requires notice of a termination to be given in a specified manner. Section 135.06 allows an action for damages and injunctive relief for violations of the Act.

The plaintiff argues that the written agreement form executed by its president on April 11, 1978, was a binding contract which could only be terminated in compliance with the provisions of Chapter 135.

In my opinion, the plaintiff has failed to prove a violation of the Act because it did not establish that a dealership agreement was ever entered into by the parties. The agreement form prepared by the defendant and signed by Mr. Gendelman states that "the undersigned, a distributor of school supplies, in consideration of a promotional allowance to be given by Acme United Corporation, hereby agrees to provide the following services on behalf of Acme United Corporation: . . . The publication and distribution of a Catalog of School Supplies . . . A copy of our latest catalog is submitted herewith." It is undisputed that the plaintiff never provided a copy of such a catalog as required. It is elementary contract law that an acceptance is not effective unless the offeree accepts in the manner prescribed by the offeror. Nelson, Inc. v. City of Milwaukee Sewerage Commission, 72 Wis.2d 400, 419, 241 N.W.2d 390 (1976). The terms of acceptance were specified in the form agreement prepared by the defendant. They were not complied with by the plaintiff, and therefore no contract was formed. Consequently, the Wisconsin Fair Dealership Law claim must fail.

Robinson-Patman Act Claims

The Plaintiff contends that the discount is either an illegal price discrimination under 15 U.S.C. § 13(a), for which there is no cost justification, or an illegal promotional allowance under 15 U.S.C. § 13(d), or both. I believe that the case comes within the ambit of § 13(a) but not within § 13(d). The former section covers price discrimination such as discounts; the latter section covers payments by the seller to the buyer in consideration of services or facilities provided by the buyer. See Chicago Spring Products Co. v. U. S. Steel Corp., 254 F.Supp. 83, 84-85, affirmed, 371 F.2d 428 (7th Cir. 1966). This case involves a price discount, although it is denominated a "promotional allowance," and therefore the case will be considered only under § 13(a).

The defendant does not dispute that several of the jurisdictional elements of a § 13(a) claim are present: the defendant is a "person" covered by the Act; the alleged discrimination is attributable to the same seller in its dealings with different purchasers; the scissors in question are "commodities of like grade and quality"; and the alleged discrimination involves interstate commerce. See, 3 Von Kalinowski, Antitrust Law and Trade Regulation, § 23.021. The plaintiff also has met the contemporaneous-sales jurisdictional requirement. The uncontested facts reveal that the plaintiff was successful in receiving orders from schools in 1974 and 1975 at a time when the defendant was selling scissors to the designated distributors of school supplies at the discounted price. For purposes of proving its prima facie case, these contemporaneous sales at different prices are sufficient. The sales at different prices need only be reasonably contemporaneous. Loren Specialty Mfg. Co. v. Clark Mfg. Co., 241 F.Supp. 493, 498 (N.D.Ill.1965), affirmed 360 F.2d 913 (7th Cir.), cert. denied 385 U.S. 957, 87 S.Ct. 392, 17 L.Ed.2d 303 (1966).

The central issue in this case is whether there has been a substantive violation of the Robinson-Patman Act. That is, has there been a discrimination in price? The defendant argues that its price discount is functionally available to all purchasers who choose to qualify as distributors, and therefore the discount is not prohibited by the Act. FLM Collision Parts, Inc. v. Ford Motor Co., 543 F.2d...