Delaware Valley Marine Sup. Co. v. American Tobacco Co.

• Decision Date: 08 December 1961
• Docket Number: No. 13369.,13369.
• Citation: 297 F.2d 199
• Parties: DELAWARE VALLEY MARINE SUPPLY COMPANY, Appellant, v. AMERICAN TOBACCO COMPANY, Philip Morris, Incorporated; Liggett & Myers Tobacco Company; R. J. Reynolds Tobacco Company; P. Lorillard Company; Lipschutz Bros., Inc.; Janis Lipschutz, Executrix of the Estate of Albert Lipschutz, Deceased; Janis Lipschutz; Morton Lipschutz; Mae Lipschutz.
• Court: U.S. Court of Appeals — Third Circuit

297 F.2d 199 (1961)

DELAWARE VALLEY MARINE SUPPLY COMPANY, Appellant, v. AMERICAN TOBACCO COMPANY, Philip Morris, Incorporated; Liggett & Myers Tobacco Company; R. J. Reynolds Tobacco Company; P. Lorillard Company; Lipschutz Bros., Inc.; Janis Lipschutz, Executrix of the Estate of Albert Lipschutz, Deceased; Janis Lipschutz; Morton Lipschutz; Mae Lipschutz.

No. 13369.

United States Court of Appeals Third Circuit.

Argued June 6, 1961.

Decided December 8, 1961.

Edwin P. Rome, Philadelphia, Pa., for appellant (Morris L. Weisberg, Blank, Rudenko, Klaus & Rome, Philadelphia, Pa., on the brief).

Joseph W. Swain, Jr., Philadelphia, Pa., for appellee Liggett & Myers Tobacco Co. (C. Brewster Rhoads, S. Jonathan Emerson, Montgomery, McCracken, Walker & Rhoads, Philadelphia, Pa., on the brief), and for all appellees.

John B. H. Carter, Philadelphia, Pa., for R. J. Reynolds Tobacco Co. and for all other appellees.

John G. Harkins, Jr., Philadelphia, Pa., for appellee R. J. Reynolds Tobacco Co. (Pepper, Hamilton & Scheetz, Philadelphia, Pa., on the brief).

R. Sturgis Ingersoll, Philadelphia, Pa., for appellee American Tobacco Co. (Joseph P. Flanagan, Jr., Ballard, Spahr, Andrews & Ingersoll, Philadelphia, Pa., on the brief).

H. Francis DeLone, Philadelphia, Pa., for appellee Philip Morris, Inc. (Matthew J. Broderick, Barnes, Dechert, Price, Myers & Rhoads, Philadelphia, Pa., on the brief).

Jay H. Eiseman, Philadelphia, Pa., for appellees Lipschutz Bros., Inc., and others (Ronald H. Isenberg, Barba & Eiseman, Philadelphia, Pa., on the brief).

Robert W. Sayre, Joseph Neff Ewing, Jr., Saul, Ewing, Remick & Saul, Philadelphia, Pa., for appellee P. Lorillard Co.

Before BIGGS, Chief Judge, and HASTIE and FORMAN, Circuit Judges.

BIGGS, Chief Judge.

The plaintiff-appellant, Delaware Valley Marine Supply Company, has sued the defendants-appellees, American Tobacco Company, Liggett & Myers Tobacco Company, P. Lorillard Company, Philip Morris, Incorporated and R. J. Reynolds Tobacco Company (the "tobacco companies"), Lipschutz Bros., Inc. and the individuals named in the title of this cause, alleging violation of Section 1¹, ² of the Sherman Act, 15 U.S.C.A. § 1. The plaintiff seeks treble damages, attorney's fees and injunctive relief. Judgment was entered for all the defendants and the plaintiff has appealed.

The plaintiff, Delaware Valley Marine, is a corporation organized to sell tax-free tobacco products and liquor to vessels engaged in the foreign trade entering the Port of Philadelphia. It applied to the defendant tobacco companies for a "direct listing," to enable it to purchase cigarettes tax-free for resale to ships. All of the tobacco companies³ declined to sell cigarettes to the plaintiff, and it never commenced to do business. At the time of the tobacco companies' refusals to do business with the plaintiff, all were selling direct to Lipschutz Bros., Inc., an established firm in the business of selling tobacco, whiskey and other supplies to ships in the Port of Philadelphia. In addition, Reynolds and Lorillard had a second Philadelphia outlet, M. J. Kelly Company, which was in the business of selling a full line of ship supplies. The plaintiff alleges that the tobacco companies acted in concert in restraint of trade and that Lipschutz in effect aided and abetted the conspiracy.

After all of the plaintiff's evidence had been presented the defendants moved for a directed verdict pursuant to Rule 50(a), Fed.R.Civ.Proc., 28 U.S.C. These motions were denied;⁴ they were also denied when renewed at the close of all of the evidence. The trial court then submitted all issues to the jury on special interrogatories pursuant to Rule 49(a). After deliberating for five hours the jury was unable to agree on an answer to the first interrogatory⁵ and was discharged. All the defendants then moved for judgment in accordance with their earlier motions for directed verdict as authorized by Rule 50(b).

The defendants argued that the plaintiff's case was fatally defective in three respects:⁶ (1) that no proof had been introduced from which the jury could find that the plaintiff had such a business or property interest as to give it standing to maintain the suit at bar; (2) that there was no direct evidence of conspiracy and none from which a jury could infer that the defendants had conspired; and (3) that there was no proof that the plaintiff had suffered any damage. Reversing the position it had first taken when the motions were made, prior to the submission of the interrogatories to the jury, the trial court granted the defendants' motions to dismiss the action on the ground that the plaintiff had not proved any damage. See 184 F.Supp. 440. As the plaintiff had stated its view that a finding of damage was a necessary basis for the granting of injunctive relief, the trial court refrained from passing on evidence submitted by the plaintiff to prove the conspiracy. In view of the disposition that we make of the litigation it is unnecessary to pass on the issue of whether proof of damages is a prerequisite to obtaining an injunction. In disposing of the Rule 50(b) motions the trial court also ruled that there was evidence from which the jury was entitled to find that the plaintiff had a business within the meaning of Section 4 of the Clayton Act, 15 U.S.C.A. § 15, and therefore possessed the standing to maintain the suit at bar. The defendants have not contested this ruling.

On appeal the plaintiff urges that the trial court's ruling on damages was erroneous. The defendants contend that it was not and assert also that the plaintiff failed to produce any evidence of conspiracy and that therefore the motions for directed verdict in their favor must be granted.⁷

On motions for a directed verdict in favor of the defendants⁸ the evidence must be considered in the light most favorable to the plaintiff and it is entitled to the benefit of all inferences which can reasonably be drawn from the record in its behalf. So viewing the case we conclude that the judgment below must be affirmed because of the failure of the plaintiff to produce evidence from which a jury would be entitled to infer that the defendants had conspired in refusing to deal with the plaintiff.

In so concluding we are aware of the difficulties of proof of modern anti-trust conspiracy and that the difficulties increase as the number of conspirators lessens.⁹ It is certainly true that "the picture of conspiracy as a meeting by twilight of a trio of sinister persons with pointed hats close together belongs to a darker age."¹⁰ But it is the fact that conspiracy remains an essential ingredient of a case based on Section 1. Conscious parallelism, relied on heavily by the plaintiff here, is of aid in demonstrating the existence of sophisticated and silent agreements which so often have injuriously restrained trade. But conscious parallelism is not yet a conclusive legal substitute for proof of conspiracy.¹¹ It is circumstantial evidence the probative value of which necessarily varies with the kind of parallelism and the factual setting where it is found.¹² Some business practices may provide strong evidence of agreement: sealed bids for 6,000 barrels of cement, for example, from eleven firms, identical to the fraction of a cent, could hardly be coincidence.¹³ The inference of agreement is strengthened if the participants are many and if they comprise a non-oligopolistic industry, where the economic pressures forcing action and reaction with competitors are absent. But, as we stated in Milgram v. Loew's Inc., 192 F.2d 579, 583 (3 Cir., 1951), cert. denied 343 U.S. 929, 72 S.Ct. 762, 96 L.Ed. 1339 (1952): "This does not mean * * * that in every case mere consciously parallel business practices are sufficient evidence, in themselves, from which a court may infer concerted action." We think this case falls within the category that we recognized in our dictum in Milgram, the category in which conscious parallelism is not enough.

As is usual in Section 1 cases, the plaintiff here offers no direct proof of conspiracy. In effect, all of the direct evidence is to the contrary for all the defendants have denied expressly the existence of any agreement. The plaintiff's case at its best can be summed up as follows: In January or February, 1956, Drew J. T. O'Keefe, Esquire, a member of the Pennsylvania Bar, who was one of the parties interested in forming the plaintiff corporation,¹⁴ contacted two local tobacco company representatives, Beckwith of Philip Morris and Comey of Reynolds. During the ensuing discussions, conducted separately, O'Keefe asked to purchase cigarettes and indicated that he intended to get in touch with all major cigarette manufacturers. Both Beckwith and Comey refused the applications but stated that their principals probably would sell to the plaintiff if it obtained other brands of cigarettes for sale. No additional contacts were made with any of the defendants until July, 1956, some weeks subsequent to the incorporation of the plaintiff. At this time letters of application were sent to at least three of the tobacco companies, PM, American and Liggett & Myers. Reynolds and Lorillard claimed that these letters were not received by them and were not mailed. Receiving no response, the plaintiff sent registered letters to these three defendants on August 21, 1956, offering to buy C.O.D., and asserts that it sent identical registered letters to the other two tobacco company defendants. Reynolds and Lorillard contend that they did not receive these letters. We will assume arguendo that there was sufficient evidence offered by the plaintiff to prove to the jury that the plaintiff's letters were mailed by it to Lorillard and received by that company. As stated, O'Keefe previously had made direct contact with a representative of Reynolds and had tried to purchase cigarettes from that company.

In the interval between the letters, i. e., between July 7 and August 21,...