Gaetzi v. Carling Brewing Company

• Decision Date: 25 May 1962
• Docket Number: Civ. A. No. 21820.
• Parties: John A. GAETZI, d/b/a John A. Gaetzi Distributing Company, Plaintiff, v. CARLING BREWING COMPANY, Defendant.
• Court: U.S. District Court — Western District of Michigan

205 F. Supp. 615

John A. GAETZI, d/b/a John A. Gaetzi Distributing Company, Plaintiff, v. CARLING BREWING COMPANY, Defendant.

Civ. A. No. 21820.

United States District Court E. D. Michigan, S. D.

May 25, 1962.

James G. Fleming and L. Russell Heuman, Jackson, Mich., for plaintiff.

Hahn, Loeser, Keough, Freedheim & Dean, John Ladd Dean and Albert I. Borowitz, Cleveland, Ohio, Fischer, Sprague, Franklin & Ford, David G. Barnett, Detroit, Mich., for defendant.

McCREE, District Judge.

Plaintiff, a former distributor of Carling beer and ale, commenced the present action on October 30, 1961, seeking damages for defendant's wrongful termination of his Carling distributorship. Count 1 of the complaint asserts a treble damage claim under Section 4 of the Clayton Act, 15 U.S.C. § 15, 15 U.S. C.A. § 15. In Count 2, it is claimed that the termination is actionable on various common law grounds.

Defendant filed a motion for summary judgment on Count 1, on the ground that the cause of action set forth therein is barred by the four-year statute of limitations applicable to private antitrust actions, 15 U.S.C. § 15b, 15 U.S.C.A. § 15b.

In the course of argument on the motion, plaintiff suggested that the period of limitations was suspended by reason of fraudulent concealment on the part of defendant. In view of this development, the court entertained and granted a motion for leave to amend the complaint for the purpose of alleging facts relative to concealment of the cause of action. Plaintiff subsequently filed an amended complaint, and defendant renewed its motion for partial summary judgment.

The allegations contained in the antitrust count may be summarized as follows. In February, 1952, plaintiff, who was then a successful independent distributor of various brands of beer and ale in Jackson County, Michigan, agreed to undertake the distribution of defendant's products, which at that time were virtually unknown in that locality. In succeeding years, plaintiff's sales of defendant's products increased dramatically.

At various times after plaintiff had assumed the Carling franchise defendant indicated displeasure because plaintiff was not discontinuing the distribution of competing brands of beer, and in November, 1953, at defendant's insistence, plaintiff discontinued distribution of two such brands. Plaintiff also was prevailed upon to increase his price for brands other than defendant's. In addition, defendant induced plaintiff to divest himself of an outside interest in an unrelated business and to devote himself exclusively to distribution of beer. Plaintiff thus was reduced to a state of nearly total dependence upon defendant.

In 1953 and 1954, plaintiff heard of reports circulating in the trade that defendant was planning to terminate his distributorship. Although defendant assured plaintiff that these reports were false and complimented plaintiff on his past and present performance, defendant suddenly and without explanation terminated plaintiff's franchise in November, 1955.¹ In plaintiff's place, defendant substituted another distributor who has favored Carling products to the prejudice of those of defendant's competitors.

The complaint further alleges that the termination was the result of a conspiracy between defendant and others to eliminate competition from other brands of beer and to achieve for themselves a monopoly of the brewing industry in the United States.

The nature and origin of the alleged conspiracy is described in detail in the complaint. Defendant, Carling Brewing Company, a Virginia corporation, is a subsidiary owned and controlled by Canadian Breweries, Ltd., a Canadian corporation. It is alleged that the conspiracy originated in 1930 among officers and directors of Canadian Breweries (then known as Brewing Corporation of Ontario, Ltd.) and a group of investors from the United Kingdom, known as the "London Committee".

Between 1930 and 1959, the parent corporation acquired numerous brewing company subsidiaries in the United States and Canada. Canadian Breweries, defendant Carling Brewing Company, and other subsidiaries, initially by oral agreement, engaged independent distributors in key territories throughout the United States to introduce defendant's products to the consuming public. These distributors were encouraged to expand their personnel and capital investment to the end of increasing sales of defendant's products. After the distributors had succeeded in building a profitable business in defendant's products, they were required to sign a distributorship contract prepared by defendant. This contract affords either party the right to terminate at will and without prior notice. The right to terminate is without value to the distributor and in practical effect places him at defendant's mercy. However, distributors were told by defendant that the termination clause was intended for new and untried distributors and would not be invoked against established and successful ones.

After distributors had built the sale of defendant's products to substantial volumes, defendant and its co-conspirators began to dictate price schedules for competing brands and to demand that certain brands be discontinued. In the meantime, new distributorships, composed of persons allied with the conspirators, were secretly set up. Thereafter the original distributorships were substantially reduced or entirely terminated, and the territory was reassigned to the new distributors. This, in substance, is the scheme by which plaintiff claims that he and many other independent distributors have been victimized, and for which he seeks relief.

Date on Which Cause of Action Accrued

Federal law must be applied to determine when a private antitrust claim accrues. Emich Motors Corp. v. General Motors Corp., 229 F.2d 714, 59 A.L.R.2d 159 (7th Cir. 1956); Delta Theaters v. Paramount Pictures, 158 F. Supp. 644 (E.D.La.1958), appeal dismissed, 259 F.2d 563 (5th Cir. 1958). The cases uniformly hold that a cause of action for damages under the antitrust laws does not arise with the formation of an illegal conspiracy, but rather when "the plaintiff's interest is invaded to his damage". Suckow Borax Mines Consol. v. Borax Consolidated, 185 F.2d 196, 208 (9th Cir. 1950), cert. denied, 340 U.S. 943, 71 S.Ct. 506, 95 L.Ed. 680 (1951). Accord: Radio Corporation of America v. Rauland Corp., 186 F.Supp. 704 (E.D. Ill.1956); Muskin Shoe Co. v. United Shoe Machinery Corp., 167 F.Supp. 106 (D.Md.1958); Delta Theaters v. Paramount Pictures, supra.

In his deposition, plaintiff testified that he received written notice of the cancellation of his distributorship on November 7, 1955. He also testified that the last delivery of beer from defendant was made on November 2, 1955, and the last order placed by plaintiff with defendant, which was unfilled by reason of the cancellation of the distributorship, was placed in early November, 1955, prior to receipt of notice of termination of the distributorship.

Accordingly it appears, and I so find, that plaintiff first sustained the damage alleged on November 7, 1955. It follows that the cause of action asserted in Count 1 of the amended complaint accrued on that date.

Applicability of Federal Four-Year Statute of Limitations

15 U.S.C. § 15b, 15 U.S.C.A. § 15b provides as follows:

"Any action to enforce any cause of action under sections 15 or 15a of this title shall be forever barred unless commenced within four years after the cause of action accrued. No cause of action barred under existing law on the effective date of this section and sections 15a and 16 of this title shall be revived by said sections."

This federal statute of limitations for private antitrust suits was enacted on July 7, 1955, to take effect six months thereafter, viz., on January 7, 1956.

It will be seen that the present cause of action, which accrued on November 7, 1955, arose in the interval between the enactment and the effective date of the federal limitations statute.

Plaintiff contends that the Michigan six-year statute of limitations² governs this action. Defendant urges that the four-year federal statute controls.

Defendant's position finds ample support in the cases. See United Shoe Machinery Corp. v. International Shoe Machine Corp., 275 F.2d 459 (1st Cir. 1960); Herman Schwabe, Inc. v. United Shoe Machinery Corp., 274 F.2d 608 (2d Cir. 1960); United Banana Co. v. United Fruit Co., 172 F.Supp. 580 (D.Conn. 1959); April v. National Cranberry Ass'n, 168 F.Supp. 919 (D.Mass.1958); Muskin Shoe Co. v. United Shoe Machinery Corp., 167 F.Supp. 106 (D.Md. 1958); Solinski v. General Electric Co., 149 F.Supp. 784 (D.N.J.1957).

It is true that the above-cited cases involved causes of action antedating the enactment of the federal statute, whereas the instant action accrued after the enactment date. This factual difference is without significance and presents, if anything, a stronger case for applying the federal prescriptive period.

The Congressional purpose in postponing the operation of the new limitations statute was stated in April v. National Cranberry Ass'n, supra, 168 F.Supp. at 924:

"Section 15b and the amendments to section 16 were enacted so as not to take effect for six months, in order to allow persons having rights more than four years old at the date of passage, but still not barred under their local statute, a period of grace in which to commence suit."

If the federal statute had taken effect immediately upon passage, persons with viable claims under longer state limitations statutes may have found themselves barred from bringing suit. To avoid unfairness and to safeguard the rights of such persons, Congress provided the six-months grace period within which to commence suit on old claims. See House Report No. 422 (H.R. 4954), 84th Congress, 1st Session (Apr. 18, 1955). Obviously plaintiff here was not in that position and could not have been aggrieved had the new federal statute taken effect...