Gilbert's Ethan Allen Gallery v. Ethan Allen, Inc.

• Decision Date: 03 September 1993
• Docket Number: No. 5-91-0746,5-91-0746
• Citation: 251 Ill.App.3d 17,620 N.E.2d 1349
• Parties: , 190 Ill.Dec. 88, 1993-2 Trade Cases P 70,429 GILBERT'S ETHAN ALLEN GALLERY, Plaintiff-Appellee and Cross-Appellant, v. ETHAN ALLEN, INC., Defendant-Appellant and Cross-Appellee (Bly & Sons, Inc., Defendant-Cross-Appellee).
• Court: United States Appellate Court of Illinois

Page 1349

620 N.E.2d 1349

251 Ill.App.3d 17, 190 Ill.Dec. 88,

1993-2 Trade Cases P 70,429

GILBERT'S ETHAN ALLEN GALLERY, Plaintiff-Appellee and Cross-Appellant, v. ETHAN ALLEN, INC., Defendant-Appellant and Cross-Appellee (Bly & Sons, Inc., Defendant-Cross-Appellee).

No. 5-91-0746.

Appellate Court of Illinois Fifth District.

Sept. 3, 1993.

Rehearing Denied Oct. 20, 1993.

Dennis E. Rose, Donovann, Rose, Nester & Szewczyk, P.C., Belleville, for appellant.

Roy C. Dripps, The Lakin Law Firm, Wood River, for Gilbert's Ethan Allen Gallery.

Goffstein, Kraus, Sherman, Morganstern & Seigel, Jerome S. Kraus, Lori R. Koch, St. Louis, MO, for Bly & Sons, Inc.

Justice WILLIAM A. LEWIS delivered the opinion of the court:

Defendant Ethan Allen, Inc. (Ethan Allen), appeals from a judgment of the circuit court of Madison County in favor of plaintiff, Gilbert's Ethan Allen Gallery, on plaintiff's claim that Ethan Allen violated the Illinois Antitrust Act (the Illinois Act) (Ill.Rev.Stat.1985, ch. 38, par. 60-1 et seq.). Plaintiff cross-appeals a judgment in favor of defendant Bly & Sons, Inc. (Bly), on plaintiff's claim that Bly violated the Illinois Act. The issues on appeal are: (1) whether the trial court applied the correct legal test in finding that Ethan Allen violated section 3(3) of the Illinois Act (Ill.Rev.Stat.1985, ch. 38, par. 60-3(3)); (2) whether the trial court erred in computing damages for plaintiff; (3) whether the trial court erred in finding that Bly did not violate the Illinois Act; and (4) whether the trial court erred in refusing to order attorney fees to plaintiff. We reverse on issue (1) and affirm on issue (3). Issues (2) and (4) need not be discussed.

I

Ethan Allen is a manufacturer and distributor of furniture whose products are distributed to the consumer through a network of authorized dealers. Plaintiff was an Ethan Allen dealer from 1956 to 1972 and an exclusive Ethan Allen dealer from 1972 to 1985. Plaintiff's store was located in Alton, but plaintiff advertised throughout the metropolitan St. Louis area and made most of its sales to residents from Missouri. Ethan Allen's share of the metropolitan St. Louis furniture market was more than 1% but less than 2%. In 1985, Ethan Allen terminated its relationship with plaintiff and informed plaintiff that it would no longer recognize plaintiff as an authorized dealer. As a result of that termination, Bly became the sole authorized dealer of Ethan Allen furniture in the St. Louis metropolitan area. Bly has one store located in Fairview Heights, Illinois, and one in Chesterfield, Missouri. Plaintiff, meanwhile, became a competitor of Bly and Ethan Allen by becoming a Drexel furniture dealer.

Plaintiff brought this action alleging its termination was a result of a conspiracy between Ethan Allen and Bly to fix prices in violation of the Illinois Act. (Ill.Rev.Stat.1985, ch. 38, pars. 60-3(2), (3).) At a bench trial, the court heard evidence that it is Ethan Allen's practice to publish suggested retail prices, and it prefers its dealers to set their resale prices accordingly. Former Ethan Allen sales representative Jack Tripp testified that he serviced plaintiff's account with Ethan Allen. Tripp further stated that an Ethan Allen executive told him in 1984 that plaintiff would not be an Ethan Allen dealer much longer because it was a discounter and sold furniture for less than the suggested price.

Lewis Gilbert testified that Nathan Ancell, chairman of the board of Ethan Allen, informed him that Ethan Allen strongly disapproved of plaintiff's discounting policy. Gilbert further testified that he lost $126,000 as a result of the termination by Ethan Allen. After Ethan Allen's termination, plaintiff became a Drexel furniture dealer. The $126,000 sum represented the cost to change the furniture displays Ethan Allen required him to maintain. He stated that the changeover required him to close down the store for a period of time and operate at a reduced level for an additional period of time, resulting in additional losses of $226,000 in 1987 and $140,000 in 1988.

At the close of evidence, the court entered judgment in favor of plaintiff on its claim against Ethan Allen and against plaintiff on its claim against Bly. The court concluded that Ethan Allen's actions forcing plaintiff from the marketplace constituted a violation of section 3(3) of the Illinois Act (Ill.Rev.Stat.1985, ch. 38, par. 60-3(3)). The court awarded plaintiff $492,000 in damages plus costs of suit, but not attorney fees.

Ethan Allen appeals the judgment against it, and plaintiff cross-appeals the judgment in favor of Bly. Plaintiff does not argue or contend on appeal that Ethan Allen violated section 3(2) of the Illinois Act, which section prohibits conspiracies to restrain trade or commerce. We reverse as to the judgment against Ethan Allen in favor of plaintiff and affirm as to the judgment against plaintiff in favor of Bly.

II

The first issue we are asked to address by Ethan Allen is whether the trial court correctly applied the law in finding that Ethan Allen violated section 3(3) of the Illinois Act, which provides that every person shall be deemed to have committed a violation of the Illinois Act if they:

"(3) Establish, maintain, use, or attempt to acquire monopoly power over any substantial part of trade or commerce of this State for the purpose of excluding competition or of controlling, fixing, or maintaining prices in such trade or commerce." (Ill.Rev.Stat.1985, ch. 38, par. 60-3(3).)

Section 11 of the Illinois Act provides, in pertinent part:

"When the wording of this Act is identical or similar to that of a federal antitrust law, the courts of this State shall use the construction of the federal law by the federal courts as a guide in construing this Act." (Ill.Rev.Stat.1985, ch. 38, par. 60-11.)

Ethan Allen argues that the wording of section 3(3) of the Illinois Act is similar to that of section 2 of the Sherman Antitrust Act (Sherman Act) (15 U.S.C.A. sec. 2 (West Supp.1993)) and that the trial court should have followed Federal precedent in this case. The Federal case law addressing section 2 of the Sherman Act requires that a market-share analysis be made to determine if competition is sufficiently injured so that the monopolizing activities constitute a violation of the Illinois Act. Eastman Kodak Co. v. Image Technical Services, Inc. (1992), 504 U.S. 451, 112 S.Ct. 2072, 119 L.Ed.2d 265; Wigod v. Chicago Mercantile Exchange (7th Cir.1992), 981 F.2d 1510.

In the case before us, the trial court found that while there was a dearth of Illinois cases construing section 3(3) of the Illinois Act, MBL (USA) Corp. v. Diekman (1985), 137 Ill.App.3d 238, 91 Ill.Dec. 812, 484 N.E.2d 371, indicated that violation of section 3(3) of the Illinois Act is a "per se " violation which makes a market-share analysis or a rule-of-reason analysis unnecessary. The trial court further noted that section 3(3) of the Illinois Act and section 2 of the Sherman Act are different. Section 2 of the Sherman Act provides:

"Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court." (15 U.S.C.A. sec. 2 (West Supp.1993).)

Comparing the two statutes, the trial court reasoned that section 2 of the Sherman Act prohibits monopolizing, attempts to monopolize, and conspiracy to monopolize trade or commerce, while section 3(3) of the Illinois Act prohibits monopolizing only when it is done for the purpose of excluding competition or of controlling, fixing, or maintaining prices. After concluding that section 3(3) of the Illinois Act differs from the Federal antitrust statute because the Illinois Act is narrower in scope, the trial court stated that it had "to determine [from the evidence] whether or not a monopoly existed and whether the monopoly existed for the purpose of excluding competition or fixing prices.".

As we will attempt to make clear, the trial judge correctly stated the issues in the case but he did not set the issue out completely. The trial court had to determine from the evidence whether Ethan Allen had monopoly power over any substantial part of trade or commerce. It may have been that the failure to add the underlined words caused the trial judge to overlook the necessity of proof that Ethan Allen had monopoly power over a substantial part of trade or commerce in furniture. The trial judge did state in his order:

"Where there are two viable entities doing the same thing in the same general area, and the supplier to the two entities runs one of the entities out of business and turns it all over to the other attempting to control the prices in the marketplace--that is the abuse referred to by the drafters of the statutes."

This statement and the disregarding of the deficiency in evidence as to relevant market and market share by the trial judge lead us to the conclusion that the trial judge was considering Ethan Allen furniture, a single brand, to be the relevant market. The court's reasoning does have a certain logic in that it follows that Ethan Allen would have a monopoly power over a substantial part of trade or commerce in Ethan Allen products. Similarly, Ethan Allen ceased doing business with plaintiff, one of two outlets for Ethan Allen products was eliminated, and thus, competition was eliminated as to Ethan Allen products.

It is not clear from the trial court's ruling as to whether the trial court applied the construction of Federal law by the Federal courts as a guide in construing the Illinois Act. The trial judge seemed...