Elder-Beerman Stores Corp. v. Federated Dept. Stores, Inc.

• Decision Date: 11 April 1972
• Docket Number: No. 20716,20762.,20716
• Parties: The ELDER-BEERMAN STORES CORP. et al., Plaintiffs-Appellees, v. FEDERATED DEPARTMENT STORES, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

459 F.2d 138 (1972)

The ELDER-BEERMAN STORES CORP. et al., Plaintiffs-Appellees, v. FEDERATED DEPARTMENT STORES, INC., Defendant-Appellant.

Nos. 20716, 20762.

United States Court of Appeals, Sixth Circuit.

April 11, 1972.

Dennis G. Lyons, Washington, D. C., Bruce L. Montgomery, Norton F. Tennille, Jr., Washington, D. C., John O. Henry, Dayton, Ohio, on brief; William L. McGovern, Arnold & Porter, Washington, D. C., Estabrook, Finn & McKee, Dayton, Ohio, of counsel, for appellant.

Jerome Goldman, Cincinnati, Ohio, Mitchell B. Goldberg, Goldman, Cole & Putnick, Cincinnati, Ohio, of counsel, for appellees.

Before EDWARDS, MILLER and KENT, Circuit Judges.

KENT, Circuit Judge.

This is an appeal from a jury verdict, in an anti-trust case, in favor of the plaintiff, The Elder-Beerman Stores Corp., in the amount of $1,275,097, which was trebled under the statute,¹ and judgment entered in the amount of $3,825,291. Judgment for the plaintiff, The Elder-Beerman Stores Corp., was entered in only one of the two actions submitted to the jury. The first action was commenced on November 27, 1961, and was combined in trial with the second case which was commenced on June 30, 1966. Upon the trial the jury returned a verdict of "no cause for action" in the first case and announced the verdict which has been previously referred to in the second case.

The appeal now before the Court relates only to the verdict for the plaintiff in the second case. The defendants named in the complaint included Federated Department Stores, Inc., Associated Merchandising Corporation (A.M.C.), its wholly owned subsidiary AIMCEE Wholesale Corporation (A.W.C.), and 66 suppliers. The suppliers were severed from the case for the purposes of this trial. Plaintiffs will be referred to as Elder-Beerman, and the defendants as Federated or Rike's.

In the complaint Elder-Beerman made claims against Federated and the other defendants asserting that they had "combined and entered into combinations * * * to injure and destroy the plaintiff Elder-Beerman * * * as competitors * * * to restrain interstate trade and commerce unreasonably and unlawfully * * * and establish a monopoly of and to attempt to monopolize the department store business in the Dayton, Ohio, area * * *." Before the cases came on for trial all but twelve of the supplier defendants had been dismissed from the case by the plaintiffs. In the complaint plaintiff also asserted that Federated had violated the Robinson-Patman Act,² but this claim was dropped prior to trial, and the Court submitted the case to the jury solely on the issues of violation of Sections 1 and 2 of the Sherman Act.³

The Court stated in ruling upon the defendant's motion for new trial that "there was insufficient evidence to justify damages on any claims under the Clayton Act." However, on this record it appears that any award of damages was by virtue of Section 4 of the Clayton Act⁴ for violations of Sections 1 and 2 of the Sherman Act.

Federated since 1959 has been the owner of Rike's, the leading department store in Dayton for many generations. The guiding head of Elder-Beerman and the other plaintiffs was Arthur Beerman who had been in the clothing business in Dayton for a number of years before 1945 when he opened Beerman Stores, Inc. for the sale of general merchandise. Subsequently the (Beerman) business expanded and grew by the opening of new stores and the acquisition of existing stores in the Dayton area. During the period from 1957 through 1965, the years involved in the lawsuits in question, the total sales of the Elder-Beerman Stores grew from $10,440,000 to $33,300,000.

The lawsuit upon which the judgment was based was commenced in 1966, and sought damages for the period commencing with 1962. In 1962 the plaintiffs did a gross business of $26,500,000, and in 1965 a gross business of $33,300,000. The plaintiffs conceded that Federated and its predecessor, the Rike-Kumler Company, were completely unsuccessful in monopolizing the department store business in Dayton.⁵ The lawsuits, the first of which was instituted in 1961, were successful in forcing the suppliers, willingly or unwillingly, to sell to Elder-Beerman, since, as stated in plaintiffs' brief, by the time of trial "all but 14 of the supplier defendants had agreed to sell to Elder-Beerman without discrimination and were dismissed from the suit and Elder-Beerman dismissed two other supplier defendants in whom it had lost interest."

Plaintiffs' whole theory of liability was that there was a conspiracy between Federated (and/or its predecessor) and the suppliers for the purpose of destroying the plaintiffs' ability to compete on fair terms, and for the purpose of attempting to obtain a monopoly.^5a

THE CONSPIRACY IN RESTRAINT OF TRADE THEORY

To establish the alleged conspiracy Elder-Beerman relied upon what might be described as the "rimless wheel" theory. It was the theory of Elder-Beerman that having introduced evidence that Rike's, AMC and AWC had used what Elder-Beerman refers to as "coercion"⁶ to persuade some suppliers to grant to Rike's the exclusive right to sell the merchandise involved, that Elder-Beerman had, therefore, established a conspiracy and should be permitted to put in evidence proofs in regard to exclusives granted by other suppliers without presenting evidence to show that Rike's had in fact used coercion to persuade such suppliers to grant to Rike's the exclusive right to sell the suppliers' merchandise and thereby include such suppliers as part of the alleged conspiracy. Elder-Beerman offered volumes of hearsay testimony, much of it from its own employees, as to alleged statements supposed to have been made by representatives of suppliers,⁷ including some not named as original defendants, which plaintiff claims should be interpreted to mean that the refusal to sell to Elder-Beerman was because of "coercion" on the part of Federated.^7a

An examination of the record reveals that there was direct evidence of an exclusive relationship between Rike's and many of the suppliers named as defendants. There was hearsay evidence of the exclusive relationship as to several. On the record before us this Court reaches the conclusion that there was circumstantial evidence of an exclusive arrangement resulting from some "coercion" as to six of the suppliers. There was direct evidence of what might be termed "coercion" as to four suppliers. There was hearsay evidence, primarily from Elder-Beerman employees, in regard to "coercion" in exclusive arrangements as to fifteen suppliers.⁸ As to the remaining supplier defendants the basic evidence was that plaintiff claimed there was an exclusive or a refusal to sell to Elder-Beerman. There was also some evidence of an effort by Rike's to obtain an exclusive or a refusal by Rike's to buy from certain suppliers who sold to Elder-Beerman.

Much of the documentary evidence related to the refusal of certain suppliers to sell to Elder-Beerman but little of it could be dignified as setting forth in the correspondence a statement by the supplier that the refusal was because of coercion on the part of Rike's and there was evidence of other reasons for the sales to Rike's including Rike's heavy promotional activity as to lines for which it had an exclusive arrangement. An example of this is Frigidaire refrigerators, manufactured in Dayton. Rike's had an exclusive arrangement for the sale of Frigidaire refrigerators in department stores in Dayton, although they were sold in area appliance stores. It appeared from the evidence that Frigidaire maintained an exclusive arrangement with Rike's and refused to sell to Elder-Beerman because Frigidaire had concluded that if it made its refrigerators available to Elder-Beerman that Rike's would take on additional refrigerator lines, to which it would give substantial promotion, which in the opinion of Frigidaire would result in a definite reduction in the total unit sales of Frigidaire refrigerators in the Dayton area. And again as to Farah Manufacturing Company (maker of men's slacks) there was some evidence, of a hearsay nature, that the refusal to sell such slacks to Elder-Beerman was because of coercion on the part of Rike's. The letter quoted⁹ casts quite a different light on this evidence and in fact might be considered sufficient reason for excluding all hearsay testimony as to the alleged coercion of this supplier as not raising a substantial issue for the jury.

In regard to some lines of merchandise there was evidence as to the availability of alternative items. An examination of the record shows that little or no attention was given to the suitability of such alternative lines, failure of proof which this Court considers to be fundamental in the context of this lawsuit. As an example: admittedly, Elder-Beerman sold Simmons, Serta and several other lines of mattresses and did a very substantial volume of business in the field. Rike's had an exclusive arrangement for the sale of Stearns & Foster mattresses. There was not a great deal of evidence as to the relative merits of the several mattresses, except that the plaintiff claimed that Stearns & Foster was the pre-eminent mattress sold in department stores. No evidence was offered as to the relative markets served by these several brands of mattresses. We cannot accept the plaintiff's claim that there was a restraint of trade as to the articles involved because of Rike's exclusive arrangements with the suppliers without competent evidence relating to the availability and suitability of alternative lines. The fact that Elder-Beerman desired to sell the lines did not make the articles involved so unique as to eliminate the need for such evidence. Hershey Chocolate Corp. v. Federal Trade Commission, 121 F.2d 968 (3rd Cir., 1941).¹⁰

The Supreme Court has dealt with the question of exclusive arrangements between supplier and seller as related to a claimed conspiracy in restraint of trade on more than one...