Flintkote Company v. Lysfjord

• Decision Date: 03 June 1957
• Docket Number: No. 15005.,15005.
• Citation: Flintkote Company v. Lysfjord, 246 F.2d 368 (9th Cir. 1957)
• Parties: The FLINTKOTE COMPANY, a Corporation, Appellant, v. Elmer LYSFJORD and Walter R. Waldron, Doing Business as Aabeta Co., Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

246 F.2d 368 (1957)

The FLINTKOTE COMPANY, a Corporation, Appellant, v.Elmer LYSFJORD and Walter R. Waldron, Doing Business as Aabeta Co., Appellees.

No. 15005.

United States Court of Appeals Ninth Circuit.

March 29, 1957.

Rehearing Denied June 3, 1957.

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Harold A. Black, G. Richard Doty, McCutchen, Black, Harnagel & Greene, Los Angeles, Cal., for appellant.

Alfred C. Ackerman, Los Angeles, Cal., for appellee.

Before STEPHENS, BARNES and HAMLEY, Circuit Judges.

BARNES, Circuit Judge.

Appellees as plaintiffs on July 21, 1952, filed a complaint under the Sherman Anti-Trust Act¹ against the Acoustical Contractors Association of Southern California, Inc., and certain members thereof (six individuals, and eight corporations, individuals, or partnerships doing business under a fictitious firm name).The Flintkote Company and four John Does were also joined as defendants.The essential interstate commerce was alleged to have been in acoustical tile.

To understand this case, it is first necessary to look at the pleadings.All defendants, other than Flintkote, were charged with violating the law in the following particulars:

"For some time prior to the date of the filing of this complaint and continuously since prior to January 1, 1951, the defendants herein, with the exception of Flintkote, well-knowing all of the foregoing facts have been engaged in a combination and conspiracy to restrain and to monopolize trade and commerce in acoustical tile in violation of * *"

the Sherman Act.The general plan and purpose was:

"1.To maintain and adhere to non-competitive prices * * *

"2.To refrain from competing with each other * * *

"3.To allocate the sale and installation of acoustical tile among members of the defendant, The Association, * * *

"4.To exclude non-member acoustical tile contractors from their legal right to compete in the purchase, sale, and installation of acoustical tile in Los Angeles and surrounding areas by use of the following means among others:

"(a) By boycotting, threatening to boycott, and otherwise coercing manufacturers * * *

"(b) By concertedly entering inordinately low bids for jobs * *"Tr. 10, 11

It was then alleged that plaintiff entered into an agreement shortly prior to January 1, 1952, to buy from Flintkote "a continuous supply of a complete line of acoustical tile;" and that:

"In or about March 1952, and solely because of the active and successful competition of plaintiffs with members of the defendant, The Association, and the effect of such competition on the illegal, non-competitive price fixing policies and activities of said members, the defendant Flintkote was induced to terminate its agreement to supply plaintiffs with acoustical tile products by reason and because of the concerted action and coercion exerted upon said defendant by members of the defendant, The Association, in the form of threats to boycott Flintkote products in the Los Angeles area and elsewhere in the State of California by said defendants in the event Flintkote continued supplying said products to plaintiffs."Tr. 13, 14

A First Amended Complaint was lodged January 28, 1953, and filed March 23, 1953, by appellees.Plaintiffs' theory of their case was changed to directly charge the defendantFlintkote Company, with agreeing to sell acoustical tile to plaintiffs in the latter part of 1951, and that "all defendants" from an unknown date "prior to the year 1951, and continuously thereafter to date of filing the complaint" conspired to restrain and have restrained trade and commerce, in violation of Sections 1and2 of the Sherman Act.Thus, the amended complaint charges Flintkote with being a member of the conspiracy.

In their original complaint, plaintiffs asked for $75,000 damages; that any award be trebled; for costs of suit and attorney's fees; and that defendants be enjoined from continuing any of the alleged unlawful practices.

In their amended complaint, plaintiffs asked for $100,000 damages, without any prayer for trebling the same; for costs of suit and attorney's fees; that defendants be enjoined from continuing any of the alleged unlawful practices; that the defendant Flintkote be enjoined from any agreement with other defendants to refuse to sell to plaintiffs, or in any way agreeing with other defendants, to perpetuate or assist in perpetuating the alleged conspiracies, their purposes or objects; and that Flintkote, finally, be required to

"* * * continue said contract and agreement so long as there exists no reason under sound business principles and practices for terminating the same."

Flintkote, answering the Amended Complaint, asserted with care and verbosity common to pleadings, a general denial; alleged it had not participated in any conspiracy in restraint of trade, or to create or maintain a monopoly; set forth that it sold tile to three of the defendant's contractors, and had at times sold to three others and to plaintiffs; admitted several sales of acoustical tile to plaintiffs; alleged it made no contract with plaintiffs of any kind, nor any contract to supply plaintiffs, either on any continuing basis, or any basis, or at all.

As a first and separate defense, Flintkote alleged that it sold one carload lot to plaintiffs for resale in the San Bernardino-Riverside area (as distinguished from the Los Angeles area); that said sale was conditioned upon an understanding that plaintiffs would use the tile so sold in the San Bernardino-Riverside area, and not engage in the contracting business in the Los Angeles metropolitan area; that when plaintiffs breached said condition of sale, and contracted for installations in the Los Angeles metropolitan area, the defendantFlintkote Company refused to sell plaintiffs further tile.

This answer was filed on June 26, 1953.On July 31, 1953, a stipulation and order was entered dismissing the cause of action as to all named defendants except Flintkote.On May 4, 1955, the jury trial commenced.At the start of the trial, it was brought to the court's attention that $20,000 had been paid to the plaintiffs in exchange for a covenant not to sue, running in favor of all defendants except Flintkote.It was stipulated that the court could advise the jury

"that a settlement of the action had been made as between the plaintiff and all defendants except the defendant Flintkote, but the Court shall not state the monetary consideration, keeping that away from the attention of the jury."

Because of this settlement, some of the jury instructions requested by plaintiffs and filed by them on April 29, 1955, in their reference to defendants, were not accurate.Before the jury was empanelled, counsel for defendant called to the court's and opposing counsel's attention, "that it would be almost imperative that plaintiffs' instructions be recast,"Tr. 155"because in some instances we even have a situation where you tell the jury that they could find against some but not all the defendants * * *"

It was further agreed by court and counsel, before trial, that because there were both legal and equitable issues in the case, the "first were to be handled by the jury and the latter by the judge."Tr. 158 to 161, incl.The record does not disclose that any action, affirmative or negative, was taken on the demand for injunctive relief.

Flintkote Company now appeals from a judgment against it, based on a jury verdict for $50,000, trebled by the court to $150.000, plus $25,000 attorney's fees, plus $165.70 costs, minus the $20,000 received by plaintiff-appellees from certain original partiesdefendant other than appellant, or a total judgment of $155,165.70.

Appellant urges fifteen grounds for reversal.

We believe we can best discuss these fifteen alleged errors by grouping them as follows:

First: The sufficiency of the evidence, (particularly as to knowledge by the defendant of the conspiracy, and its participation therein) to support a verdict of violation of the antitrust laws.

Second: Alleged errors in admission of evidence.

Third: Alleged errors in instructions, other than damages.

Fourth: Alleged error in refusing to grant a new trial, in instructions respecting damages, in the fixing of attorney's fees, and in the method of crediting the $20,000 payment.

First: The Sufficiency of the Evidence

Was there any substantial evidence properly before the jury from which it could reasonably draw the conclusion on an issue of fact, that defendant Flintkote had violated the antitrust laws?

Defendant maintained its refusal to deal with plaintiff was a legitimate business decision; that it had no part in the alleged conspiracy among the original "Association defendants" to restrain trade.Hence it is urged, the Flintkote refusal to sell cannot be participation in a conspiracy, and Flintkote having no knowledge that such a conspiracy existed, could much less have knowingly participated therein.

"The requirement is dual," says appellant, "it requires both knowledge and participation, and neither is sufficient without the other," relying on United States v. Falcone, 1910, 311 U.S. 205, at page 210, 61 S.Ct. 204, at page 207, 85 L.Ed. 128, where the Supreme Court said:

"The gist of the offense of conspiracy * * * is agreement among the conspirators to commit an offense attended by an act of one or more of the conspirators to effect the object of the conspiracy.Citing cases.Those having no knowledge of the conspiracy are not conspirators citing cases; and one who without more furnishes supplies to an illicit distiller is not guilty of conspiracy even though his sale may have furthered the object of a conspiracy to which the distiller was a party but of which the supplier had no knowledge";

and on Weniger v. United States, 9 Cir., 47 F.2d 692, at page 693 where this Court said:

"The failure of a person to prevent the carrying out of a conspiracy, even though he has the power so to do, will not make him guilty

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