Chuck's Feed & Seed Co., Inc. v. Ralston Purina Co.

• Decision Date: 11 March 1987
• Docket Number: No. 85-2337,85-2337
• Citation: 810 F.2d 1289
• Parties: , 1987-2 Trade Cases 67,662 CHUCK'S FEED & SEED CO., INC., a corporation, Appellee, v. RALSTON PURINA COMPANY, a corporation, Appellant. South Carolina Defense Trial Attorneys' Association, Amicus Curiae.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1289

810 F.2d 1289

55 USLW 2496, 1987-2 Trade Cases 67,662

CHUCK'S FEED & SEED CO., INC., a corporation, Appellee, v. RALSTON PURINA COMPANY, a corporation, Appellant.

South Carolina Defense Trial Attorneys' Association, Amicus Curiae.

No. 85-2337.

United States Court of Appeals,

Fourth Circuit.

Argued May 8, 1986.

Decided Feb. 9, 1987.

Rehearing and Rehearing En Banc Denied March 11, 1987.

Timothy W. Bouch and Brad J. Waring (Young, Clement, Rivers & Tisdale, Charleston, S.C., on brief), for appellant.

Richard S. Rosen (Susan C. Rosen, Rosen, Rosen & Hagood, Charleston, S.C., on brief), for appellee.

J. Brantley Phillips, Jr., Natalma M. McKnew, Leatherwood, Walker, Todd & Mann, Greenville, S.C., L. Sidney Connor IV, Nelson, Mullins, Grier & Scarborough, Myrtle Beach, S.C., William H. Davidson, II, Nauful & Ellis, Columbia, S.C., on brief, for amicus curiae.

Before MURNAGHAN and SPROUSE, Circuit Judges, and HAYNSWORTH, Senior Circuit Judge.

MURNAGHAN, Circuit Judge:

Ralston Purina Company appeals from the judgment of the United States District Court for the District of South Carolina, based on a jury verdict, that it violated the South Carolina Unfair Trade Practices Act by terminating its dealership relationship with Chuck's Feed & Seed Co. The case raises important questions concerning the scope of the South Carolina statute.

I.

Chuck's Feed and Seed Co., Inc., under the direction of Charles (Chuck) Lambert, opened a retail feed store in 1972 in Summerville, South Carolina, a suburban area near Charleston. Lambert's store catered to pet owners and small farmers, selling livestock and pet feeds in bags or containers, rather than in bulk. From 1975 until February, 1982, Lambert carried products manufactured by Ralston Purina Company. Although no written dealership agreement was signed, Lambert was regarded as a dealer in Purina's distribution system. As such, he purchased products directly from Purina, and was entitled to resell these products to other retailers who were known as "sub-dealers." Lambert was also authorized to use Purina signs and displays in his store. Purina's District Manager informed Lambert that as long as Lambert continued to sell Purina feed, Purina would not authorize another Purina dealership within ten miles of his store. Purina adhered to that policy during Lambert's tenure as a dealer. Lambert was a successful Purina dealer with a high volume of Purina feed sales.

In the summer of 1981, the District Sales Manager for ConAgra Feed asked Lambert if he would be interested in carrying the ConAgra brand. ConAgra is a direct competitor of Purina because the two brands of feed are similar in quality and price. Lambert had previously carried many other brands of feed, but the other brands were less expensive and inferior in quality to Ralston Purina's feed, and Lambert testified that these brands did not compete with Purina. When Lambert informed Purina's District Sales Manager, Michael Munn, that he was considering ConAgra's proposal, Munn initially told Lambert that if Lambert started to carry ConAgra feed, Lambert's Purina dealership would be terminated. Later, Munn returned to Lambert's store and apologized for his earlier remarks. Munn told Lambert that his Purina dealership would not be cut off if he chose to sell ConAgra feed, but that Munn doubted that Lambert could sell both feeds successfully. Lambert thereafter began to sell ConAgra feed as well as Purina feed in his store. On several occasions, Munn expressed concern to Lambert about Lambert's sales of ConAgra. In February, 1982, Purina terminated Lambert's dealership. Purina's stated reason for the termination was "failure to obtain market penetration."

Lambert made several attempts to have his dealership reinstated, but was refused. He also attempted to obtain Purina products as a "sub-dealer," but was unable to secure the products at wholesale prices. To offset his declining feed sales, Lambert began to carry pet supplies and exotic birds. Lambert's gross sales, which had remained relatively static during the period of his Purina dealership, increased significantly following his termination, rising from $387,562 in 1981 to $559,167 in 1982 and $717,768 in 1983.

Lambert and Chuck's Feed & Seed Co., Inc. filed the present action on January 25, 1983. The complaint sought recovery from Ralston Purina on four causes of action: (1) violation of Sec. 1 of the Sherman Act, 15 U.S.C. Sec. 1; (2) violation of Sec. 3 of the Clayton Act, 15 U.S.C. Sec. 14; (3) violation of the South Carolina Unfair Trade Practices Act, S.C.Code Ann. Sec. 39-5-20; and (4) common-law wrongful termination. Ralston Purina moved for partial summary judgment as to the Unfair Trade Practices Act claim, arguing that the Act is unconstitutionally vague. The district court denied the motion. Trial began on March 5, 1985. Following the close of the plaintiffs' case, the district court denied Ralston Purina's motion for a directed verdict on the federal antitrust claims. However, the court granted Purina's motion to direct a verdict for the defendant on the claim for common-law wrongful termination.

At the close of all the evidence, the jury was asked to identify its verdict as to each of the remaining causes of action. No other special interrogatories were submitted to the jury. The jury returned a verdict for Ralston Purina on the Sherman Act and Clayton Act claims. However, the jury returned a verdict for the plaintiffs on the South Carolina Unfair Trade Practices Act claim, assessing actual damages at $78,750. The district judge subsequently ruled that Purina's violation of the South Carolina Act was "willful." Pursuant to S.C.Code Ann. Sec. 39-5-140, which prescribes the trebling of damages and the award of attorneys' fees to plaintiffs in cases of "willful" violations, the district judge trebled the damages award to $236,250 and awarded $86,879.75 in attorney's fees and costs, for a total award of $323,129.75. On October 28, 1985, the district court denied Ralston Purina's motion for judgment notwithstanding the verdict. Purina makes four arguments on appeal: (1) that the district court erred in denying its motion for j.n.o.v.; (2) that the South Carolina Unfair Trade Practices Act is unconstitutionally vague; (3) that any violation that it may have committed was not "willful"; (4) that the damages award is unsupported by the evidence.

II.

In reviewing the denial of a directed verdict or judgment n.o.v., the court must consider whether, when the evidence is taken in the light most favorable to the party opposing the motion, there is any substantial evidence to support the jury's verdict. If there is any such evidence, the verdict should be upheld. Evington v. Forbes, 742 F.2d 834, 835 (4th Cir.1984).

The South Carolina Unfair Trade Practices Act (UTPA) provides that

Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.

S.C.Code Ann. Sec. 39-5-20(a). Section 39-5-20(b) states that it is the intent of the state legislature that the construction of paragraph (a) should be guided by the decisions of the Federal Trade Commission and the federal courts in interpreting Sec. 5(a)(1) of the Federal Trade Commission Act, 15 U.S.C. Sec. 45(a)(1). ¹ This court has suggested, in dicta, that the UTPA may also extend to conduct which would give rise to a cause of action for wrongful termination under South Carolina common law. Bostick Oil Co. v. Michelin Tire Corp., 702 F.2d 1207, 1220 (4th Cir.1983), cert. denied, 464 U.S. 894, 104 S.Ct. 242, 78 L.Ed.2d 232 (1983).

We need not decide whether the UTPA should be construed to encompass wrongful termination claims, because no such claim has been made out on the facts of this case. In directing a verdict for Purina on Lambert's common-law wrongful termination claim, the district court found the evidence insufficient to support such a common-law claim. Necessarily, then, the court also found evidence insufficient to support an identical claim brought under the label of the Unfair Trade Practices Act. Because we have not been asked to review the district court's ruling on that directed-verdict motion, we must accept the district court's conclusions.

We therefore turn to the task of interpreting the independent meaning of the Unfair Trade Practices Act. Like the Federal Trade Commission Act, the South Carolina statute is aimed at two distinct kinds of conduct: unfair or deceptive practices and anticompetitive practices. Only anticompetitive practices are at issue here. The few cases that have interpreted the South Carolina UTPA have not been concerned with the anticompetitive issue. Cf., Clarkson v. Orkin Exterminating Co., 761 F.2d 189 (4th Cir.1985); State ex rel. McLeod v. C & L Corp., 280 S.C. 519, 313 S.E.2d 334 (Ct.App.1984) (both deal with consumer deception). Accordingly, we must look to interpretations of the FTC Act to guide decision under the UTPA insofar as it prohibits anticompetitive conduct.

In the area of anticompetitive practices, the FTC Act functions as a kind of penumbra around the federal antitrust statutes. An anticompetitive practice need not violate the Sherman Act or the Clayton Act in order to violate the FTC Act. Federal Trade Comm'n v. Sperry & Hutchinson Co., 405 U.S. 233, 239-44, 92 S.Ct. 898, 903-05, 31 L.Ed.2d 170 (1972). However, the scope of the FTC is nonetheless linked to the antitrust laws. The power of the Federal Trade Commission to declare anticompetitive trade practices "unfair" extends primarily to "trade practices which conflict with the basic policies of the Sherman and Clayton Acts even though such practices may not actually violate those laws." Federal Trade Comm'n v. Brown Shoe Co., 384 U.S. 316, 321, 86 S.Ct. 1501, 1504, 16 L.Ed.2d 587 (1966). The Supreme Court has explained that "[i]t is ... clear that the Federal Trade Commission Act was designed to supplement and...