Dart Drug Corporation v. Parke, Davis & Company, 18268.

• Decision Date: 11 February 1965
• Docket Number: No. 18268.,18268.
• Citation: 344 F.2d 173,120 US App. DC 79
• Parties: DART DRUG CORPORATION et al., Appellants, v. PARKE, DAVIS & COMPANY, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

120 US App. DC 79, 344 F.2d 173 (1965)

DART DRUG CORPORATION et al., Appellants, v. PARKE, DAVIS & COMPANY, Appellee.

No. 18268.

United States Court of Appeals District of Columbia Circuit.

Argued November 16, 1964.

Decided February 11, 1965.

Mr. Robert B. Hirsch, Washington, D. C., for appellants.

Mr. Roberts B. Owen, Washington, D. C., for appellee.

Before PRETTYMAN, Senior Circuit Judge, and WRIGHT and McGOWAN, Circuit Judges.

McGOWAN, Circuit Judge.

In an action for treble damages premised upon conduct assertedly violative of Sections 1 and 3 of the Sherman Act,¹ the plaintiff below appeals from an order of the District Court denying its motion for summary judgment and granting that of the defendant. Our appellate scrutiny of an action of this kind ordinarily looks only to its immediate setting, but our appraisal of its propriety here has been in the light of both the representations made to the District Court by the parties in support of their respective motions, and the arguments made on appeal by new counsel for appellant. So viewed, we are of the opinion that the ruling was fully justified, and we sustain it.

I

The proceedings in the District Court on the cross-motions for summary judgment are intelligible only by reference to the unfolding of an antitrust incident involving important litigation between the appellee drug manufacturer (Parke, Davis) and the Government. The appellant drug retailer (Dart) had, like other drug retailers and wholesalers in the metropolitan area of Washington, a role in the events giving rise to that litigation. Those events are described in detail in the Supreme Court's opinion in United States v. Parke, Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 (1960). It is enough for our purposes to note that they constituted throughout July and August of 1956 a collaboration and concert of action between Parke, Davis and its customers, directed towards resale price maintenance and of such a nature as to cause the Supreme Court to find Parke, Davis in violation of Section 1 of the Sherman Act.

In its opinion, the Supreme Court not only identified with some specificity the forbidden collaborative activities, but also characterized them as having begun in July, and ended in September, 1956.² The Court said that at least one reason for the termination of these illegal activities was the fact that "the Department of Justice, on complaint of Dart Drug Company, had begun an investigation of possible violation of the antitrust laws." 362 U.S. at 36, 80 S.Ct. at 508. This investigation culminated, in May of 1957, in the institution by the Government of both criminal and civil proceedings against Parke, Davis, asserting violations of Section 1 of the Sherman Act. The criminal case ended in November, 1957, with a judgment of acquittal. The civil case has had both a longer life and a different result. Because of the asserted relationship between it and the issues before us, the course of that litigation needs to be recounted in some detail.

The trial of the case in the District Court, sitting without a jury because the relief sought was injunctive in nature, initially terminated in July of 1958 in a judgment for Parke, Davis at the close of the Government's evidence. Findings of fact and conclusions of law were entered by the trial judge, United States v. Parke, Davis & Co., 164 F.Supp. 827, 834 (D.D.C.1958), at least two of the former of which are of present interest. The first is as follows, and suggests on its face the origins of the present litigation:

"26. On December 12, 1957, subsequent to the trial of the companion criminal action, Parke, Davis informed Dart Drug Company that it was permanently closing the Dart account and did not intend to have any further dealings with that company. Since that time, Parke, Davis has not sold its products to Dart Drug. There is no evidence, however, that Parke, Davis made any effort to influence the dealings of Dart Drug with the wholesalers, and Dart Drug has continued to purchase Parke, Davis\' products from wholesalers in the District of Columbia and to sell and advertise such products at cut prices. Parke, Davis\' action in ceasing relations with Dart was a purely unilateral one, and there is no evidence that it had any relation to Dart\'s prices or advertising policies."

The second relates both to the time when the assertedly illegal activity ended and the need for explicit restraints upon its resumption:

"27. In the fall of 1956, Parke, Davis in good faith abandoned and discontinued its efforts to maintain minimum resale prices in the District of Columbia and Virginia through refusals to sell. Since the fall of 1956, and up until the present time, retailers in both areas, including retailers alleged to be co-conspirators, have continuously sold and advertised Parke, Davis products at cut prices, and have been able to obtain those products from both the wholesalers and/or Parke, Davis itself. Parke, Davis has made no effort to compel the cessation of these practices. There is no proof or indication of any intention on the part of Parke, Davis to resume such efforts. There is no present threat or substantial probability or likelihood that Parke, Davis will attempt, in the District of Columbia or Virginia, to cut off retailers who fail to sell its products at its suggested minimum resale prices, or to cut off wholesalers because they in turn sell to such retailers. Nor is there any threat or substantial probability or likelihood that Parke, Davis will contract, combine or conspire with others to fix or maintain prices or terms or conditions of sale for its products in the District of Columbia and Virginia."

The Government did not acquiesce in the trial court's conclusions with respect to the innocence of the program effectuated by Parke, Davis and its customers in the summer of 1956, nor as to the demonstrated lack of need, even assuming the illegality of that program, of an injunction against its future reinstatement. It challenged these propositions in the Supreme Court, but it did not attack Finding No. 26 nor so much of Finding No. 27 as related to the ending of the illegal collaboration in 1956. Nor did the Supreme Court, sua sponte, question these findings, although its opinion fully reflected its awareness of the 1957 refusal to deal with Dart. See note 2 supra.

The Supreme Court did embrace the Government's position on the alleged clash between the commands of Section 1 of the Sherman Act and the efforts of Parke, Davis, in collaboration with its customers, to enforce resale price maintenance in the summer of 1956. It rejected the contention that Parke, Davis had acted unilaterally and wholly without reference to the cooperation, connivance, or participation of others — without, in short, any element of the combination, conspiracy or agreement proscribed by Section 1. It held, contrarily, that this element was present in 1956 by reason of the concert of purpose and action which obtained between Parke, Davis and its customers, including Dart, in the creation and effectuation of a program of resale price maintenance.

The District Court's alternative ground of judgment was similarly unacceptable to the Supreme Court. The latter did not believe that the evidence supported the trial court's finding that "the compelling reason for defendant's so doing ceasing its efforts was forced upon it by business and economic conditions in its field." 164 F.Supp. at 830. The Supreme Court inclined rather to the belief that the program had been abandoned at the summer's end in 1956 because of the antitrust investigation launched by the Government; and it not unnaturally regarded this as a slender support for a judgment that injunctive relief was neither necessary nor appropriate. It reversed and remanded with directions to issue an injunction "unless the company elects to submit evidence in defense and refutes the Government's right to injunctive relief established by the present record."

Parke, Davis did so elect, although not for the purpose of defending on the merits as to the illegal combination alleged to have existed in 1956. Instead, at a trial resumed in June of 1960, it introduced evidence to prove that the program found unlawful had in truth ended completely in 1956 and that, in consequence, the entry of an injunction in 1960 speaking to the future was not in keeping either with the requirements of the statute or of sound equity jurisprudence. The Government chose to submit no further evidence and, on July 18, 1960, the trial judge made further (and, as he termed them, "supplementary") findings of fact, from which he drew the legal conclusion that the injunctive relief sought by the Government would be "unnecessary and inappropriate" and should, accordingly, be denied. The findings of fact are to the effect that the illegal activities took place in July and August, 1956, directly after which Parke, Davis concluded that, for economic and commercial considerations, efforts at resale price maintenance were not in Parke, Davis' interest; and that, certainly by January, 1957, this change of policy had been fully adopted and disseminated throughout the company, and was adhered to thereafter.

The Government once more went to the Supreme Court, not, however, to attack what the trial court had done on remand, namely, the denial of an injunction, but what it had failed to do, i. e., to enter a judgment that Parke, Davis had violated Section 1. The Government took no objection to any of the supplemental findings of fact, nor did it appeal from the denial of an injunction. It did insist that it was entitled to a judgment on the merits. The Supreme Court agreed,³ and directed that such a judgment be entered. It also held that "the District Court should retain the case on the docket for future action in the event the Government applies for further relief from an alleged resumption by Parke Davis of illegal activity." The use by the...