Gamco, Inc. v. Providence Fruit & Produce Bldg.

• Decision Date: 13 February 1952
• Docket Number: No. 4600.,4600.
• Parties: GAMCO, Inc. v. PROVIDENCE FRUIT & PRODUCE BLDG., Inc., et al.
• Court: U.S. Court of Appeals — First Circuit

194 F.2d 484 (1952)

GAMCO, Inc. v. PROVIDENCE FRUIT & PRODUCE BLDG., Inc., et al.

No. 4600.

United States Court of Appeals First Circuit.

February 13, 1952.

George Alpert, Boston, Mass. (Herbert Alpert, Clarice Neumann, and Alpert & Alpert, all of Boston, Mass., on brief), for appellant.

Frank Licht, Providence, R. I. (Andrew P. Quinn, Providence, R. I., on brief), for appellees.

Before CLARK¹ and WOODBURY, Circuit Judges, and FORD, District Judge.

CLARK, Circuit Judge.

This appeal brings up for review the decision of a district court, finding no violation of the antitrust laws in the ouster of a tenant, a Rhode Island corporation, from a building in Providence specially located and equipped for wholesale produce marketing, when control over the corporation passed to out-of-state interests.

Plaintiff, Gamco Incorporated, is a corporation organized under Rhode Island law and located in Providence, which purchases fruit and vegetables in truck and freight-car lots from interstate dealers for sale primarily to the bulk jobbers and retailers of the city. It brought the present action in the district court against defendant Providence Fruit & Produce Bldg., Inc., as lessor of the building in question, joining also the latter's directors and certain other Rhode Island concerns which lease space in the building. In the action plaintiff sought to enjoin alleged violations of Sections 1 and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1 et seq., growing out of its exclusion from the building, and to recover treble the damages consequentially sustained. After trial without jury the district court entered judgment for defendants on the ground in substance that whatever the attempt to monopolize or the monopoly, their acts had not actually suppressed, or tended to suppress, competition.

The facts are substantially undisputed. The Produce Building was erected sometime prior to April, 1929, by a subsidiary of the New Haven Railroad on premises owned by the Railroad and adjacent to its main freight lines. It was designed to provide selling, storage, and shipping facilities to the fresh fruit and vegetable dealers of Providence who had found themselves forced from the downtown city streets by accumulating traffic congestion. The building and its surrounding land and road approaches were leased for a total of fifty years by the subsidiary and the Railroad respectively, to the defendant corporation. It is of three floors approximately 1,000 feet long. Local wholesalers may purchase corporate stock — of which but 100 shares were authorized — and rent individual three-floor units or bays 20 feet wide for $1,800 a year. Their bulk consignments of fresh fruit and vegetables are received by street, four rail spurs of which the building tenants have exclusive use, and Yard 17 of the New Haven Road. The facilities thus provided are substantially advantageous to local wholesalers. Retail buyers habitually congregate there and the shipping facilities are the best in Providence. As a result, since 1929 practically all fruit and vegetable dealers in the area at one time or another have held leases or stock in the defendant corporation. One of the issues developed in the case was the possibility, as asserted by the defendants, of developing alternative physical accommodations of comparable utility on other space adjacent to the railroad. The parties were in the sharpest of disputes as to the desirability of such sites and of facilities upon them if and when developed. But it was not questioned that they were not now developed or that the local trade was at present centered in this building.

Plaintiff, Gamco, was organized in 1946 as successor to the wholesale concern of G. A. Mercurio, which had been leasing space in the building. To finance purchases it arranged for credit from Sawyer & Co., another wholesale fruit and produce dealer whose business was primarily in Boston. So Gamco's shareholders pledged their stock as security, reserving the voting rights at the insistence of the defendant Building Corporation. The defendant directors then granted a one-year lease of four units, but at the expiration of the life of the lease they refused renewal. Shortly thereafter the impending financial difficulties of Gamco forced the record transfer of the pledged stock to Sawyer & Co., and since that time the board has consistently declined to renew the lease. Its refusal is grounded on a covenant in the original lease wherein plaintiff agreed not to "transfer or permit to be transferred any interest in the business" without written permission from the board. In 1948 Gamco was notified to quit the premises. It failed to comply and the defendant directors instituted suit for trespass and ejectment in the Rhode Island courts, which resulted in a judgment in their favor, affirmed by the state supreme court, Providence Fruit & Produce Bldg., Inc., v. Gamco, Inc., 76 R.I. 54, 68 A.2d 20, subsequent to the filing of the complaint in the present action.

The district court interpreted the Sherman Act in this context as condoning defendants' monopoly position as long as competition ruled the ultimate selling market subsequent to Gamco's ouster. It happens to be true that the abuses of price fixing and price leadership have been traditional criteria of illegality under the Act. See, e.g., United States v. Trenton Potteries Co., 273 U.S. 392, 47 S.Ct. 377, 71 L.Ed. 700; Appalachian Coals, Inc., v. United States, 288 U.S. 344, 53 S.Ct. 471, 77 L.Ed. 825; United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129. But there are other indicia of monopoly power, of which exclusion of competitors from the market is one, International Salt Co. v. United States, 332 U.S. 392, 396, 68 S.Ct. 12, 92 L.Ed. 20, which are condemned per se by Section 2, regardless of whether or not the position of dominance has been exploited to rig prices. American Tobacco Co. v. United States, 328 U.S. 781, 808-815, 66 S.Ct. 1125, 90 L.Ed. 1575; United States v. Aluminum Co. of America, 2 Cir., 148 F.2d 416, 427-429. The Sherman Act condemns the power which makes pricing abuse possible as well as the abuse itself. United States v. Griffith, 334 U.S. 100, 106, 68 S.Ct. 941, 92 L.Ed. 1236. Where, as here, defendants enjoy a power to deny their competitors access to the market, "evidence that competitive activity has not actually declined is inconclusive," both as to Section 3 of the Clayton Act, 15 U.S. C. § 14, Standard Oil Co. v. United States, 337 U.S. 293, 314, 69 S.Ct. 1051, 1062, 93 L. Ed. 1371, and for our present purposes under Sections 1 and 2 of the Sherman Antitrust Act.

Defendants contend, however, that a discriminatory policy in regard to the lessees in the Produce Building can never amount to monopoly because other alternative selling sites are available. The short answer to this is that a monopolized resource seldom lacks substitutes; alternatives will not excuse monopolization. The district court found: "Yard 17 is open to the public * * *. There is space adjacent to the Produce Building on its west side * * * as well as land owned by the City of Providence in the immediate vicinity. There is also space across the street from the Produce Building on Terminal Way which has track facilities." But it is only at the Building itself that the purchasers to whom a competing wholesaler must sell and the rail facilities which constitute the most economical method of bulk transport are brought together.² To impose upon plaintiff the additional expenses of developing another site, attracting buyers, and transhipping his fruit and produce by truck is clearly to extract a monopolist's advantage. United States v. Associated Press, D.C.S.D.N.Y., 52 F.Supp. 362, 371, affirmed 326 U.S. 1, 17, 18, 65 S.Ct. 1416, 89 L.Ed. 2013. The Act does not merely guarantee the right to create markets; it also insures the right of entry to old ones. See United States v. New England Fish Exchange, D.C.Mass., 258 F. 732; United States v. Tarpon Springs Sponge Exchange, 5 Cir., 142 F.2d 125.

Thus in American Federation of Tobacco Growers v. Neal, 4 Cir., 183 F.2d 869, 872, defendant trade association, which regulated and administered tobacco warehouse sales in the Danville, Virginia, area, denied plaintiff co-operative access to the local auctions. Plaintiff tried to proceed independently, but failed to attract buyers enough to make his own auctions a success. Holding that the exclusion of competing warehousemen constituted a violation of the Sherman Antitrust Act, the court said, "* * * having set up the market in this way, defendants may not be heard to say that they have not established a monopoly merely because they do not interfere with an outside warehouse if it can shift for itself." To the same effect is United States v. Terminal Railroad Ass'n of St. Louis, 224 U.S. 383, 32 S.Ct. 507, 56 L.Ed. 810, holding illegal the control of existing approaches to St. Louis by less than all competing railroads.

Admittedly the finite limitations of the building itself thrust monopoly power upon the defendants, and they are not required to do the impossible in accepting indiscriminately all who would apply. Reasonable criteria of selection, therefore, such as lack of available space, financial unsoundness, or possibly low business or ethical standards, would not violate the standards of the ...