Gutor International AG v. Raymond Packer Co., Inc.

• Decision Date: 22 March 1974
• Docket Number: No. 73-1133.,73-1133.
• Citation: 493 F.2d 938
• Parties: GUTOR INTERNATIONAL AG, Plaintiff, Appellee, v. RAYMOND PACKER CO., INC., Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

493 F.2d 938 (1974)

GUTOR INTERNATIONAL AG, Plaintiff, Appellee, v. RAYMOND PACKER CO., INC., Defendant, Appellant.

No. 73-1133.

United States Court of Appeals, First Circuit.

Argued October 4, 1973.

Decided March 22, 1974.

COPYRIGHT MATERIAL OMITTED

Arnold Manthorne, Boston, Mass., with whom Warner & Stackpole, Boston, Mass., was on brief, for defendant, appellant.

Shepard M. Remis, Boston, Mass., with whom Herrick, Smith, Donald, Farley & Ketchum, Boston, Mass., and Casey, Lane & Middendorf, New York City, were on brief, for plaintiff, appellee.

Before COFFIN, Chief Judge, MOORE^* and CAMPBELL, Circuit Judges.

LEVIN H. CAMPBELL, Circuit Judge.

Gutor International AG (Gutor), a Swiss corporation, brought a diversity action in the District of Massachusetts to recover the agreed price of 500 Ultravox dictating machines shipped to Raymond Packer Company, Inc. (Packer), a Massachusetts concern. Packer admitted that it had ordered and accepted the machines, but interposed defenses and two counterclaims. In one counterclaim Packer sought damages for Gutor's alleged breach of an agreement making Packer the exclusive distributor in the United States for Ultravox machines. The other charged Gutor and Dictaphone International AG (Dictaphone), a wholly-owned subsidiary of Dictaphone Corp. (Dictaphone US), a Michigan corporation and a major American manufacturer of dictating equipment, with creating an international monopoly in dictating equipment, allocating territories, and refusing to deal with Packer, all in violation of the antitrust laws. Treble-damages were sought.

Gutor moved for summary judgment, which the district court granted. We affirm as to the action for the price of goods sold and delivered, but reverse and remand on both of Packer's counter-claims.

From affidavits and the results of discovery proceedings, the following appears: On July 1, 1964, the Raymond Packer Company (the Packer firm), a proprietorship and the predecessor of Packer, entered into a written contract (the Agreement) with Direma Ltd. (Direma), a Swiss corporation which then manufactured and controlled the rights to Ultravox dictating machines. Described therein as agents, the Packer firm was to be Direma's sole outlet and distributor in the United States. The Packer firm bound itself not to deal in competing products, to serve Direma faithfully as agents, to endeavor to extend the sale of the machines, and not to sell outside the United States. The Agreement automatically renewed itself for three year periods,¹ prohibited assignment without written consent,² provided for termination on one month's notice for default in observance of any of its terms,³ provided for damages for breach,⁴ and specified that the Agreement would be construed in accordance with Swiss law and that all "disputes arising between the contracting parties" would be referred to arbitration in Zurich.⁵

In February, 1965, Direma sold its Ultravox manufacturing, trademark and marketing rights to Gutor. The Packer firm did not grant formal permission to transfer the rights under the Agreement, but in December, 1964, Direma's managing director advised Mr. Packer of the impending sale, and Mr. Packer did not object. In February Gutor itself notified the Packer firm that it would henceforth transact Ultravox business in Direma's stead. It invited the Packer firm's continued "close contact". Thereafter, without complaint, the Packer firm bought Ultravox products from Gutor. In May, 1965, responding to a letter from the Packer firm Gutor wrote confirming "herewith that you have been entrusted with our agency in July 1964 and that you are the exclusive and only importer of our dictating equipment for the United States." Gutor directed a potential customer to "our own agents in your territory", to wit the Packer firm, and treated Packer⁶ as its exclusive agent until March, 1968.

In December, 1965, Gutor wrote Packer thanking it for its efforts and for sending an employee to its location in Switzerland for vocational training. Gutor went on,

"In view of the fact that in spite of your efforts you did not succeed in importing the 2700 machines, fixed in our agency agreement, we would like to discuss all questions which might contribute to achieve the fixed number of minimum 3600 dictating machines for 1966." Emphasis supplied.

The letter referred to an addendum to the 1964 Agreement binding the Packer firm to purchase at least 700 machines in 1964, 2700 in 1965, and 3600 in 1966 and thereafter (subject to adjustment). Packer in fact bought only 342 in 1964, 1150 in 1965, 2080 in 1966 and 503 in 1967.

On October 25, 1967, Packer wrote Gutor ordering 1000 Ultravox machines, stating that the terms of cost and payment were to be "the same as on our last purchase of one thousand machines,"⁷ Gutor thereafter shipped 500 machines, but Gutor's Managing Director, Schmidt, while thanking Packer for the order stated that the terms would have to be "Whole amount payable without discount, against shipping documents, . . ."

Packer registered strenuous disapproval of the proposed change. Gutor replied that "no other agent" had ever had such "rock bottom prices and terms". Gutor chided Packer for failing to meet its sales "target", and denied promising the terms Packer wanted.

Packer's next letter, of December 9, voiced a fear that Gutor had become intransigent over terms because it was planning to replace Packer as its agent, and inquired why two new model Ultravox machines had been sent to the New York office of Royal Typewriter rather than to Packer. Packer said that it had in the past three weeks stopped advertising and decided not to hire two new salesmen. "You can understand that with no possible future, I have no interest".

There was further recrimination and expostulation. Gutor elaborated upon Packer's alleged failure to sell in adequate volume. It explained that the machines were in Royal's office because Gutor might license Royal to manufacture in the United States. Meanwhile Packer, by letter of January 17, 1968, flatly declined to accept the machines, which had by then arrived, unless the terms were "as were stated on the purchase order and as previously". Packer also demanded written assurance "as to the future", stating that it had lost money, and blaming its low volume on defects in the machines.

On January 29, 1968, Gutor notified Packer that it reluctantly agreed to the terms of payment and Packer, without waiting for assurances, accepted delivery of the 500 machines. It did not, however, pay for them, and has refused payment to date.

Although Gutor never gave express assurances, as late as February 26, 1968, it continued to notify (with copy to Packer) persons making inquiry that Packer was its exclusive U.S. sales agent. It was, however, in secret negotiation with Dictaphone, and in March 1968 announced arrangements for Dictaphone to acquire Gutor's Ultravox business. In its letter of March 20, 1968, to Packer enclosing an announcement circular, Gutor contrasted Packer's 1968 plans to sell 3600 machines with its "meagre results" — 500 machines — in 1967. Nothing was said about the future of Packer's agency, and Packer's president states that he waited hopefully until May for word from Dictaphone. Thereafter, as a result of his own inquiries, he learned that Dictaphone had no plans to include Packer in its distribution network of an improved Ultravox line and declined, indeed, to supply even spare parts to Packer except at retail prices. Certain other Ultravox dealers abroad were, however, retained.

Dictaphone US has since that time been the sole Ultravox dealer in the United States. Neither Dictaphone, Dictaphone US, nor Gutor has sold any Ultravox machines or parts to Packer except as a retail customer. Dictaphone US solicited Packer's former dealers and customers, apparently using customer lists supplied by Packer to Gutor.

After it had become clear that Packer could not obtain machines or parts from Gutor or Dictaphone, Packer contacted Direma, which was still the Swiss distributor of Ultravox. Direma declined to supply any machines or parts on the ground that this would violate the territorial restrictions in, and lead to loss of, its own distributorship. Following this refusal Efrem A. Gordon, then attorney for Packer, wrote to Direma on September 5, 1968, claiming that Direma was still bound under the 1964 Agreement because assignment required written consent, which was never given, and that Direma would have to supply parts or be liable for breach.

On March 2, 1971, Gutor brought the instant action for the price of the 500 machines. Packer filed its answer and counterclaims for breach of the Agreement and antitrust violations. Summary judgment was entered for Gutor on all issues, and this appeal followed.

I

The district court correctly entered summary judgment against Packer for the price of the delivered machines. F. R.Civ.P. 56. Packer accepted them and was liable at the contract rate. M.G.L. c. 106, § 2-607(1).

In defense, Packer attempted to show that purchasing the machines was so bound up with the future of its Ultravox franchise that cancellation of the latter entitled Packer to withhold payment. The point is not entirely specious. Discontinuance of the distributorship might well have left Packer without incentive or means to sell and service the machines. Indeed, Packer might not have accepted them if it had known of Gutor's concealed plans. However, after Packer learned that it was no longer an Ultravox distributor, it never took timely action to revoke acceptance and hold or dispose of the machines for Gutor's account. §§ 2-608, 2-610. See §§ 2-602, 2-603, 2-604. Cf. § 2-701 (official comment); § 2-106(2) (official comment 2). Alternatively it never gave timely notice to Gutor of an election to offset damages allegedly stemming from the distributorship termination directly against Gutor's claim for the price. § 2-717; see § 2-714....