Girardi v. Gates Rubber Company Sales Division, Inc.

• Citation: 325 F.2d 196
• Decision Date: 31 December 1963
• Docket Number: No. 18008.,18008.
• Parties: Amedeo GIRARDI, doing business as Girardi Bearing Company, Appellant, v. The GATES RUBBER COMPANY SALES DIVISION, INC., Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

325 F.2d 196 (1963)

Amedeo GIRARDI, doing business as Girardi Bearing Company, Appellant, v. The GATES RUBBER COMPANY SALES DIVISION, INC., Appellee.

No. 18008.

United States Court of Appeals Ninth Circuit.

November 21, 1963.

Rehearing Denied December 31, 1963.

Joseph L. Alioto, and G. Joseph Bertain, Jr., San Francisco, Cal., for appellant.

Dayton Denious, Denver, Colo., Heller, Ehrman, White & McAuliffe, and Lawrence C. Baker, San Francisco, Cal., for appellee.

Before CHAMBERS, Chief Judge, and POPE and BARNES, Circuit Judges.

POPE, Circuit Judge.

This is a private treble damage suit under the antitrust laws. (Sec. 4 of the Clayton Act, 15 U.S.C. § 15). The appellee, here called Gates, is and has been at all times referred to herein, engaged in the business of manufacturing and distributing belts and pulleys which were commonly used for the transmission of power to various machines. Its business involved trade in commerce between California and other States of the United States.¹ The principal charge made against it by appellant was that it conspired with another to fix resale prices in violation of Sec. 1 of the Sherman Act (15 U.S.C. § 1).

The appellant Girardi had been in the business of distributing power transmission equipment, including belts and pulleys, since 1944. He first had a store at Stockton, California, which was operated by Girardi and one Jones as partners. In 1950 the partnership was dissolved and Jones formed a partnership for the carrying on of the same type of business with one Les C. Oranges who apparently had bought out Girardi's interest in the original store. Girardi then in 1950 opened a similar business in Salinas, California, another in Modesto, California, and a third in Stockton, California. The Oranges-Jones partnership was dissolved prior to 1953. At that time Jones set up his own transmission business so that by the end of 1953 Girardi, Oranges and Jones were each engaged completively in that business. Each of them was then a distributor of Gates' line of belts and pulleys. The evidence in the record indicates that at that time Oranges, who was known as a "stocking jobber" of the Gates line, had become a leading distributor of these products.

Gates supplied its jobber distributors, including Girardi, with its catalog containing a schedule of prices for sale of the Gates products. Oranges invariably adhered to these prices. Girardi had such a catalog as early as March, 1951, and he followed the suggested pricing schedule until January or February, 1954. In January, 1954, he sent out to the trade a letter advising prospective customers as follows: "This is to inform you of a change in our monthly cash discount. We have found it advisable to increase our cash discount from the present 2% 10th prox. to 10% 10th prox. This increase will become effective as of the first of February, 1954. You will continue to receive your authorized factory discount on all our merchandise. We are factory representatives throughout the Valley for the Fort Worth Power Transmission Company and carry a substantial stock of removable hub sprockets, pulleys, belts and chain. We are ready to serve you. * * * *"² This letter came to the attention of the Gates salesman who in January, 1954, discussed with Girardi this letter and the fact that Girardi had taken on a rival (Fort Worth) line of pulleys and belts. According to the testimony of Girardi, the salesman, one Price, stated, "What's this, you going out and giving 10% cash discount to people?" He said that Price also told him, "If you don't quit that, in 30 days you will be cancelled." Price denied that he made the quoted statements, although he admitted that he had questioned Girardi on that occasion respecting the matter of the 10% cash discount. At any rate, on April 6, 1954, Gates wrote to Girardi cancelling its contracts with the latter for the supply of Gates products for Girardi's Modesto and Stockton stores.

The letter cancelling Girardi's contracts stated that the contract for the furnishing of the Gates goods for the Salinas store would be kept in force only if the goods there handled were not sold outside the immediate Salinas trading area.³ On May 24, 1954, Gates cancelled the Salinas contracts.

The complaint alleges that the defendant Gates cancelled these contracts of distribution and refused to deal with the plaintiff pursuant to its plan and agreement to control and regulate resale prices charged by its distributors;⁴ that this agreement to regulate resale prices was done pursuant to a combination and agreement between the defendant and its distributors throughout the State of California in order to fix, stabilize and establish resale prices for the products of the defendant. This conduct, the complaint states, injured the business of Girardi; that this conduct was in violation of the antitrust laws; and the plaintiff prayed for recovery of three times his damages which he alleged were $35,000.

Although the complaint alleged that this was a combination and agreement between Gates and its distributors throughout the State of California, counsel for the plaintiff in the court below stated that plaintiff's effort was limited to an undertaking to show that "there was a conspiracy between Mr. Oranges and the Gates Company." At the conclusion of the plaintiff's evidence a motion was made to dismiss the action because of the plaintiff's failure to establish a prima facie case as to conspiracy and because the court would not be warranted in submitting the case as made to the jury. The motion was sustained and judgment of dismissal of the action followed.

Upon this appeal Gates asserts that even if it were permissible to infer from the evidence that Girardi was cancelled because of his refusal to adhere to retail prices fixed by Gates, this falls short of proving any conspiracy or concerted action, and that all that was established was that Gates through solely unilateral action merely exercised the right recognized in United States v. Colgate & Company, 250 U.S. 300, 307, 39 S.Ct. 465, 468, 63 L.Ed. 992 — "the long recognized right of trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal. And, of course, he may announce in advance the circumstances under which he will refuse to sell."

The proof that is necessary to make a case of the sort appellant attempted to establish here, is very thoroughly discussed in United States v. Parke, Davis & Co., 362 U.S. 29, 39, 80 S.Ct. 503, 509, 4 L.Ed.2d 505. Quoting from its earlier decision in United States v. A. Schrader's Son, Inc., 252 U.S. 85, 40 S.Ct. 251, 64 L.Ed. 471, the Court said: "* * * there is unlawful combination where a manufacturer `enters into agreements — whether express or implied from a course of dealing or other circumstances — with all customers * * * which undertake to bind them to observe fixed resale prices.'" The Court held that it is unnecessary in order to show an unlawful combination to prove that it arises from a price maintenance agreement, express or implied. The Court said that "such a combination is also organized if the producer secures adherence to his suggested prices by means which go beyond his mere declination to sell to a customer who will not observe his announced policy. * * * When the manufacturer's actions, as here, go beyond mere announcement of his policy and the simple refusal to deal, and he employs other means which effect adherence to his resale prices, this countervailing consideration is not present and therefore he has put together a combination in violation of the Sherman Act. Thus, whether an unlawful combination or conspiracy is proved is to be judged by what the parties actually did rather than by the words they used." 362 U.S. at 43-44, 80 S.Ct. at 511, 4 L.Ed.2d 505.

Fundamental to all this is the rule of United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223, 60 S.Ct. 811, 844, 84 L.Ed. 1129, that "a combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign commerce is illegal per se."⁵

From this it seems plain that if Oranges, a competitor of Girardi, objecting to the latter's cutting of the prices suggested by Gates in its catalog, persuaded Gates to cancel Girardi, or cooperated with it in eliminating Girardi from the field because of his price cutting, then Girardi would have made a sufficient case to require the questions of fact to be submitted to the jury, and it would be error to dismiss the action as was done here.

The concerted action which the plaintiff undertook to prove in this case was simple and uncomplicated. It was not asserted that there was extensive and massive concerted action by a group of manufacturers or producers of similar merchandise or products seeking to fix or stabilize sale prices generally.⁶ It is not claimed that Gates' disciplinary action was brought to bear upon numerous jobbers or dealers.⁷ There is no claim of an elaborate and extensive plan for espionage of the practices of dealers and jobbers, and there was no scheme for checking and keeping track of resale prices.⁸ There is no claim that Gates' share of the market was a major one, though of course it was the only source for Gates belts and sheaves. All that is claimed is that one single stocking jobber, Girardi, was eliminated from the handling of Gates' products at the instance of Oranges, Girardi's competitor, and this because Girardi was cutting prices. We are unable to perceive any reason why the simplicity and limited scope of the actions alleged to have been taken here would prevent the application of the rule of United States v. Socony-Vacuum Oil Co., quoted supra. Indeed, in the Socony-Vacuum case (310 U.S. at 224, 60 S.Ct. at 811, 84 L.Ed. 1129), the Court said: "Monopoly power * * * is not the only power which the Act strikes...