Hudson's Bay Co. Fur Sales Inc. v. American Legend Co-op.

• Citation: 651 F. Supp. 819
• Decision Date: 19 December 1986
• Docket Number: Civ. A. No. 86-2899.
• Parties: HUDSON'S BAY COMPANY FUR SALES INCORPORATED, Plaintiff, v. AMERICAN LEGEND COOPERATIVE, Defendant.
• Court: U.S. District Court — District of New Jersey

651 F. Supp. 819

HUDSON'S BAY COMPANY FUR SALES INCORPORATED, Plaintiff, v. AMERICAN LEGEND COOPERATIVE, Defendant.

Civ. A. No. 86-2899.

United States District Court, D. New Jersey.

December 19, 1986.

COPYRIGHT MATERIAL OMITTED

Frederick L. Whitmer, Pitney, Hardin, Kipp & Szuch, Morristown, N.J., for plaintiff.

Eric J. Lobenfeld, Dewey, Ballantine, Bushby, Palmer & Wood, New York City, Clive S. Cummis and Steven S. Radin Sills, Beck, Cummis, Zuckerman, Radin, Tischman & Epstein, Newark, N.J., for defendant.

LECHNER, District Judge.

Introduction

Plaintiff, Hudson's Bay Company Fur Sales Incorporated ("Hudson"), instituted this antitrust action against the defendant, American Legend Cooperative ("Legend"), for purported violations of sections one¹ and two² of the Sherman Act (the "Act"), as amended, 15 U.S.C. §§ 1 and 2 (Count I), for misuse of trademark and violation of the Lanham Trademark Act, 15 U.S.C. § 1121 (Count II) and for pendent claims of tortious interference with contractual relationships (Count III), tortious interference with prospective economic advantage (Count IV) and breach of contract (Count V).³

Hudson and Legend are involved in interstate commerce in the marketing and sale of mink pelts produced by mink ranchers in the United States. In particular, Hudson acts as a marketing agent and broker for mink ranchers. As such it receives, warehouses, displays and conducts auction and private sales of mink pelts. Legend was created in late 1985 when the two major American mink farmer associations, Emba Mink Breeders Association ("EMBA") and Great Lakes Mink Association ("GLMA") unified.⁴ EMBA and GLMA own various trademarks used in the marketing of mink pelts and garments. These trademarks, the most important of which is the "Blackglama" mark, were in effect transferred to Legend which polices the use of the trademarks.

Legend, in an effort to promote sales of mink pelts produced by its members, has restricted use of the various EMBA and GLMA trademarks to those mink pelts auctioned through the Seattle Fur Exchange ("SFX"), a subsidiary of Legend. The various trademarks, previously available to a qualified pelt of any member of EMBA or GLMA who sold through an auction house which had a contract with EMBA or GLMA or both, are now available only to pelts auctioned or otherwise sold through SFX. Hudson claims this restriction violated and continues to violate the antitrust laws.

On July 25, 1986, Hudson filed its verified complaint and an Order to Show Cause requesting, among other forms of relief, a temporary restraining order. Hudson contends: (1) Legend's trademark restriction constitutes an unlawful tying arrangement restraining trade in the American fur auction market, and (2) Legend and others have conspired to monopolize the American mink pelt industry.

Following a hearing and thereafter a denial of the requested temporary restraining order, pre-trial discovery was conducted and completed. By agreement among the parties and the court, the matter was tried on October 8, 9, 14, 15 and 16, 1986. Hudson and Legend submitted written summations on October 23, 1986 and presented oral rebuttals on October 27, 1986. After a review of the Stipulations by the parties, the evidence presented, the proposed findings of facts and conclusions of law, the trial briefs and summations (both written and oral), I find, for the reasons stated below, Hudson has failed to prove that Legend either (1) engaged in a restraint or attempted to restrain trade in violation of section one of the Sherman Act, or (2) monopolized or attempted to monopolize the markets in which it competes in violation of section two of the Sherman Act. Hudson has failed to prove the restriction on the use of the various trademarks (owned by EMBA and GLMA and policed by Legend) constitutes an illegal tying arrangement.⁵

Many of the findings of fact are substantiated with citations to Stipulations, or testimony or documentary evidence or a combination of such authority; such citations are not meant to be exhaustive concerning the finding. Some of these findings are based upon the record or inferences from the record which are not cited. Page or document citations are not set forth to support general findings. See, e.g., Smithkline Corp. v. Eli Lilly & Co., 427 F.Supp. 1089, 1094-1110 (E.D.Pa.1976), aff'd, 575 F.2d 1056 (3d Cir.), cert. denied, 439 U.S. 838, 99 S.Ct. 123, 58 L.Ed.2d 134 (1978); United States v. Brown Shoe Co., 179 F.Supp. 721 (E.D.Mo.1959), aff'd, 370 U.S. 294, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962); United States v. International Boxing Club of N.Y., 150 F.Supp. 397, 401-419 (S.D.N.Y.1957), aff'd, 358 U.S. 242, 79 S.Ct. 245, 3 L.Ed.2d 270 (1959).

This opinion, including the legal discussion, constitutes my Findings of Fact and Conclusions of Law. All proposed findings of fact and conclusions of law inconsistent with those set forth herein are rejected in accordance with Rule 52 of the Federal Rules of Civil Procedure.

I. Findings of Fact

A. The Parties and Entities Involved

1. Hudson is a corporation organized under the laws of New York, with its place of business presently at Carlstadt, New Jersey. Stipulation 1.

2. Hudson is a wholly owned subsidiary of the Hudson's Bay Company, a Canadian corporation. The Hudson's Bay Company is a general merchandising corporation, which owns and operates several major department stores, has a major interest in a real estate development organization and in oil and gas interests and had annual revenues during 1985 of approximately U.S. $4 billion. Stipulations 2 and 3.

3. Hudson acts as agent and broker for the sale of fur pelts and conducts auction sales of fur pelts. In the course of its business, Hudson, inter alia, receives, warehouses, sorts, grades, displays and conducts auction sales (and private sales) of mink pelts. Stipulation 8.

4. On October 9, 1985 Legend was incorporated and organized under the laws of Wisconsin, and has its place of business in Seattle, Washington. Stipulations 14 and 15. Legend is an association of mink producers engaged in interstate and foreign commerce of its members' mink products. Trans. 10/14 at 196:12-197:25.

5. Legend came into being through the unification of EMBA, a corporation, organized under the laws of Wisconsin, with its place of business in Seattle, Washington, and GLMA, a non-stock, not-for-profit corporation, organized under the laws of Wisconsin, with its place of business in Seattle, Washington. Only domestic mink ranchers who sell at least 1200 pelts⁶ through an auction house or agency that has a contract with Legend can become voting members of Legend. Trans. 10/14 at 97:3-11; 98:23-100:13; D-27; Stipulation 16. Nonvoting membership in Legend is available to non-domestic fur producers. D-27.

6. SFX is a Washington corporation with its principal place of business in Seattle, Washington and is wholly owned and controlled by Legend. SFX is in the business of collecting and auctioning fur pelts. SFX was privately owned until 1973, when it was acquired by EMBA. Stipulations 26 and 27.

7. Hudson and SFX derive their income primarily from a brokerage commission paid by the seller/rancher and a percentage fee paid by the buyer. Stipulation 54.

8. SFX competes with Hudson in the business of collecting and auctioning mink pelts and other fur pelts in the United States. For the last several years, only Hudson, SFX and Elbeco Marketing Co., Inc. ("Elbeco") have conducted auctions of mink pelts in the United States.

9. Elbeco is a corporation of the State of New Jersey with its principal place of business in North Bergen, New Jersey. Elbeco is in the business of auctioning fur pelts, including mink pelts. Stipulation 19.

10. Amerimink is an association of mink farmers, incorporated under the laws of Washington, with its place of business in Bothell, Washington. Stipulation 18.

11. Since 1970 and through the 1986 auction season, Elbeco has been the exclusive agent for the sale of mink pelts produced by the members of Amerimink that are sold under the Amerimink trademark. Stipulations 20 and 22.

B. Unification of EMBA and GLMA

12. The unification of EMBA and GLMA, which was completed on October 9, 1985 Stipulation 15, had been a goal of the two associations since at least 1970. Unification was considered desirable because, inter alia, it would combine promotional and marketing efforts of the two associations. Despite numerous proposals and many meetings, EMBA and GLMA were unsuccessful in reaching agreement on a unification plan until 1985. Stipulations 61 and 62.

13. In early 1984, EMBA engaged Management Design Association ("MDA"), a management consulting firm, to undertake a marketing review and analysis. EMBA was familiar with the work of MDA and MDA's president, Thomas P. Haass ("Haass"), since MDA had been engaged by SFX in 1978 to redesign its information systems. Stipulations 63 and 64. MDA was thereafter retained by the EMBA Board of Directors to conduct a management review of SFX and to report its findings to the EMBA Board concerning the quality of SFX management. Stipulation 65.

14. When EMBA determined in early 1984 that a general marketing study was appropriate, representatives of EMBA contacted Haass and asked him to conduct a marketing review and prepare an overview of the marketing issues facing EMBA. Stipulation 66. Pursuant to this engagement, Haass prepared a paper entitled "EMBA Marketing and Association Review", dated October 10, 1984 (the "Review"). Stipulation 67; P-1. Haass presented the Review at a joint meeting of the GLMA and EMBA Boards on October 10, 1984. Stipulation 69.

15. The Review recognized the importance of the Blackglama trademark Stipulation 70, stated that "`Quality' is the only selling advantage of American produced mink" Stipulation 71; P-1, suggested unification of EMBA and GLMA Stipulation 72; P-1 and recommended (1) the unified association be "headed by a full time professional...