Hanover Shoe, Inc. v. United Shoe Machinery Corp., Civ. A. No. 5395.

• Decision Date: 12 February 1960
• Docket Number: Civ. A. No. 5395.
• Citation: 185 F. Supp. 826
• Parties: HANOVER SHOE, INC., Plaintiff, v. UNITED SHOE MACHINERY CORPORATION, Defendant.
• Court: U.S. District Court — Middle District of Pennsylvania

185 F. Supp. 826

HANOVER SHOE, INC., Plaintiff, v. UNITED SHOE MACHINERY CORPORATION, Defendant.

Civ. A. No. 5395.

United States District Court M. D. Pennsylvania.

February 12, 1960.

Ralph M. Carson, of Davis, Polk, Wardwell, Sunderland & Kiendl, New York City, Warren, Hill, Henkelman & McMenamin, Scranton, Pa., for defendant.

Breck P. McAllister, of Donovan, Leisure, Newton & Irvine, New York City, Nogi, O`Malley & Harris, Scranton, Pa., for plaintiff.

GOODRICH, Circuit Judge.

This is an action based on the provisions of Section 4 of the Clayton Act¹ to recover treble damages for alleged injury resulting from claimed violation of Section 2 of the Sherman Act, 15 U.S.C.A. § 2, by defendant. Following pre-trial conferences Judge Murphy, prior to his illness, ordered, and counsel for the respective parties agreed to, trial of a separate issue which, in the words of the order, "may be dispositive of the case." This procedure was based on Fed.R.Civ. P. 42(b), 28 U.S.C.A. The order reads in part as follows:

"Ordered that there be tried as a separate issue in advance of trial of the other issues in this action the issue as to whether the excessive shoe machinery costs alleged by plaintiff and denied by defendant constituted an injury to plaintiff's business or property in that:

"(a) plaintiff contends that (1) all said excess machinery costs were borne by it because as a matter of law it suffered injury at the moment it paid said excess costs and (2) the facts will demonstrate that said excess costs were absorbed by it and were not reflected in adjustments of the price of shoes made with said machinery; and

"(b) defendant contends that all alleged excess costs have been passed on by plaintiff to others and thus have not been borne by plaintiff * * *."

Also included in the order was the provision that the determination of the issue to be tried should "not involve the determination of the amount of plaintiff's recoverable damage, if any." It was also provided that this separate trial should be "without prejudice to plaintiff's demand for a jury upon the general trial of this action if such general trial be required." Most important for the purpose of discussion here was a further provision that the determination of the separate issue shall proceed upon the assumption "(1) that the violation of law as alleged existed, and (2) that the excessive cost of shoe machinery as alleged existed." The decree in United States v. United Shoe Machinery Corp., D.C.D. Mass.1953, 110 F.Supp. 295, affirmed per curiam 1954, 347 U.S. 521, 74 S.Ct. 699, 98 L.Ed. 910, can also be relied on in accordance with Section 5 of the Clayton Act.²

The plaintiff's complaint charges that defendant, as a result of its unlawful control of the market, has caused plaintiff, a manufacturer of shoes, to pay excessive rentals for the lease of shoe machinery. The defendant, so far as issues here before the Court are concerned, says that, even assuming that we charged you too much, you have no basis for complaint because you passed on any excessive charges to the people to whom you sold shoes. Therefore, not being injured, you have no basis for complaint in a civil action however much we may have violated the antitrust laws. To this the plaintiff replies that it is not a seller of shoe machinery but a user of it. Its product, it says, is a machine-made shoe which it in turn sells mostly to a wholly-owned subsidiary corporation which operates a chain of retail stores throughout the United States. While it is true, says plaintiff, that we show a profit during the years wherein we claim to have paid monopolistic prices and while it is also true that our prices have gone up during this period, that price rise is a result of competition in the shoe market and has nothing to do with the excessive rental fees we have paid to defendant. A thick transcript of testimony as well as an elaborate stipulation bears on this question. The plaintiff invites the Court to make findings of fact in accordance with the proposition just asserted.

The Court's conclusion is that such findings of fact need not be made because they are unnecessary. Based upon the assumption, contained in the April 1957 order, defendant was guilty of a violation of law and did charge plaintiff an excessive price for the lease of the machinery. The Court thinks that this creates a cause of action for the difference between what plaintiff was charged and what it could properly have been charged in the absence of the monopolistic practices. This, it appears to the Court, is a straight application of sound principles of tort law with which, when stated in the abstract, probably no one would disagree. The defendant has been, by hypothesis, guilty of liability-creating conduct. Such conduct is liability-creating because (1) it violates the Sherman Act, and (2) the Clayton Act gives one injured by the violation a cause of action. As a result of the violation the plaintiff had to pay an excessive price for the use of machinery. This excessive price is the injury. The causal relation between defendant's wrong and plaintiff's harm is obvious. If there are affirmative defenses or other complicating legal issues, they are not before the Court at this time.³

We turn now to the argument that the defendant is relieved of liability because the plaintiff passed on its loss to its customers. The Court thinks this argument is invalid; otherwise, it would be necessary to go into the evidence concerning the factual accuracy of the argument. The plaintiff's injury occurred when it was charged too much for the machinery. If it had not thus been illegally charged for machinery it would have had more money to pay out in dividends, or to engage in a further development campaign to sell its shoes, or to raise the wages of its employees, or to enlarge its bank account as protection against a rainy day, or for all of these things. The plaintiff against whom a tort is committed has his cause of action at the moment that the tort occurs. Of course, he is subject to the rule of avoidable consequences and cannot sit still and let damages pile up when reasonable steps would have prevented further consequential damages.⁴ But that is the extent of his obligation. Things which happen later and let an injured plaintiff escape some of the ultimate consequences of the wrong done him do not inure to the benefit of the defendant. Thus, if a man is injured by the negligence of another and has the good fortune to have an insurance policy which recompenses him for loss, the insurance money does not reduce the damages which the wrongdoer must pay.⁵ If friends of a man against whom a tort is committed make up a purse to pay for his medical services, that does not cut down what the plaintiff may recover from the tortfeasor.⁶ Wages continued by an employer during a time when an injured man is not working do not redound to the benefit of the wrongdoer.⁷ And, likewise, if a man having sustained an injury works extra hard after his recovery and comes out at the end of the year as financially well off as he would have been without the loss of time, the wrongdoer cannot claim reduction of damages on this account.

As Mr. Justice Holmes said in Southern Pac. Co. v. Darnell-Taenzer Lumber Co., 1918, 245 U.S. 531, 533, 38 S.Ct. 186, 62 L.Ed. 451, a case in which a unamimous Supreme Court rejected a defense contention that plaintiff had not been injured since it had been able to pass on the excess charges to its customers:

"The general tendency of the law, in regard to damages at least, is not to go beyond the first step. As it does not attribute remote consequences to a defendant so it holds him liable if proximately the plaintiff has suffered a loss."⁸

Each side has cited a number of antitrust cases. Defendant says that plaintiff's cases⁹ are not in point because the issue of passing on the loss was not raised in them. Plaintiff says that the cases cited by defendant¹⁰ are either wrong or that they are distinguishable for two reasons. One, plaintiff says, is that those cases involved middlemen who were selling a product supplied for resale by a Sherman Act violator whereas plaintiff here is simply a lessee of equipment which sells its own product.¹¹ Second, it says, the "oil jobber" cases are quite different because the jobbers suffered no loss since, by the terms of their agreements, they were guaranteed a fixed margin per gallon sold; therefore, the original impact of the pecuniary loss never fell on the jobbers at all. Although the second distinguishing characteristic does not appear to hold true in the Leonard and Northwestern cases (see note 10 supra), this Court feels that the first distinction made by plaintiff is sufficient.¹² Furthermore, this Court disagrees with the dictum in Wolfe (note 12 supra) and agrees with Professor Clark (note 11 supra at 404) that where the plaintiff is a consumer of the product, rather than a middleman who resells it, he may recover the excess paid whether or not he has ultimately passed the excess along to his customers. Plaintiff herein was such a consumer.

On the issue presented on the separate trial the Court finds for plaintiff. Defendant's motion to dismiss is accordingly denied. The Court does not, of course, purport to fix the pecuniary amount of plaintiff's loss.

The issue presented on this separate trial is one which involves a controlling question of law as to which there is substantial ground for difference of opinion; an immediate appeal may materially advance the ultimate termination of this litigation. Thus, the case is an appropriate one for an interlocutory appeal under 28 U.S.C.A. § 1292(b) and a certificate to that effect will be granted upon application by defendant. Otherwise the case shall proceed to trial on the other issues involved.

1 "§ 15. Suits by persons injured; amount of recovery.

"Any person who shall be injured in his business or property by reason of anything...