J.T. Gibbons, Inc. v. Crawford Fitting Co.

• Decision Date: 09 May 1983
• Docket Number: No. 82-3025,82-3025
• Parties: 1983-1 Trade Cases 65,359 J.T. GIBBONS, INC., Plaintiff-Appellant Cross-Appellee, v. CRAWFORD FITTING CO., et al., Defendants-Appellees Cross-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 787

704 F.2d 787

1983-1 Trade Cases 65,359

J.T. GIBBONS, INC., Plaintiff-Appellant Cross-Appellee, v. CRAWFORD FITTING CO., et al., Defendants-Appellees Cross-Appellants.

No. 82-3025.

United States Court of Appeals Fifth Circuit.

May 9, 1983.

Alioto & Alioto, Joseph L. Alioto, San Francisco, Cal., for plaintiff-appellant cross-appellee.

McGlinchey, Stafford & Mintz, Dando B. Cellini, New Orleans, La., Mansour, Gavin, Gerlack & Manos Co., Ernest P. Mansour, Cleveland, Ohio, for Crawford & Lennon.

Dale, Owen, Richardson, Taylor & Matthews, Thomas E. Balhoff, Baton Rouge, La., for Capital Valve & Jennings.

Charles E. Hamilton, III, New Orleans, La., for Thomas Read & Co.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before THORNBERRY, GEE and REAVLEY, Circuit Judges.

REAVLEY, Circuit Judge:

Plaintiff brought this antitrust suit under Secs. 1 and 2 of the Sherman Act. 15 U.S.C. Sec. 1 et seq. The defendants counterclaimed for malicious prosecution. The district court directed a verdict against plaintiff on the antitrust claims but allowed the malicious prosecution claim to go to the jury. The jury returned a verdict for plaintiff. Both sides appeal. We affirm the district court's disposition on all points.

The Parties

Plaintiff is J.T. Gibbons, Inc. ("Gibbons") located in New Orleans. It is principally an exporter of a variety of goods, ranging from foodstuffs to valves and pipe fittings. The two principals of Gibbons are Cecil Keeney, chairman of the Board, and his son Richard, president.

Defendant Crawford Fitting Co. ("Crawford") is an Ohio-based corporation engaged in manufacturing valve and pipe fittings. Crawford's corporate structure includes a complicated system of separately incorporated manufacturing and warehousing subsidiaries. There are five manufacturing companies, producing different product lines. Crawford also has several incorporated regional warehouses, enabling it to reduce the lag time between receipt of orders and delivery of the product. Two of these warehouses are relevant to this suit: Southern Swagelok in Birmingham, Alabama and Microventil, the European warehouse located in Switzerland. All of these companies are owned and managed by two men, Fred Lennon and his nephew (by marriage), Francis Callahan.

Crawford's products are sold to end-users through a network of independent distributors, who buy at wholesale prices from the regional warehouses. There are two distributors named as defendants: Capital Valve and Fitting Co., in south Louisiana owned by Robert Jennings and Thomas A. Read & Co., located in Houston and owned by Thomas Read. Several other distributors are involved in this suit: Glasgow Valve and Aberdeen Valve, the Crawford distributors in Scotland; and Potomac Valve, a Maryland distributor.

Background Facts

The valve and pipe fitting industry is a highly competitive industry. As of 1977, there were over 700 manufacturers of valves and pipe fittings. Crawford is not one of the four top companies in the industry, and the four top companies do not control even 20% of the market.

Crawford, to compete in the industry, devised a system of independent distributors. Its marketing strategy emphasizes the need for the distributor to service the product and the customer, by conducting safety meetings and inspecting or replacing damaged parts. As part of this strategy, Gibbons devised its 5% plan. This plan requires a distributor who ships the product into another distributor's territory to pay 5% of the invoice price to Crawford, who sends it to the second distributor. This payment is to compensate the second distributor for any service performed.

In 1977 the Keeneys acquired Gibbons. Richard Keeney had, prior to coming to Gibbons, worked as a salesman for Capital. Richard had Gibbons expand into sales of valves and pipe fittings and solicit business in Scotland and the North Sea area. In 1977 and the first half of 1978, Gibbons' sales expanded rapidly. Gibbons initially bought Crawford Products from Capital, and then shipped directly to Prestwick Airport in Scotland.

In May of 1978, however, Capital refused to deal further with Gibbons. Gibbons then approached Read, Crawford's Houston distributor, who also refused to deal with Gibbons. Gibbons then contacted Crawford directly, threatening litigation for these refusals to deal. Crawford responded by arranging a meeting and offer from Crawford's Birmingham distributor. Gibbons rejected this offer, and proposed that Crawford make it a distributor. Unbeknownst to Crawford, however, Gibbons had obtained another source of supply through Potomac Valve and Fitting, Crawford's Maryland distributor.

Plaintiff then brought this suit. It claimed: (1) that defendants' refusal to deal constituted an unreasonable restraint of trade; (2) that all defendants conspired to eliminate Gibbons' competition in the North Sea market; (3) that Crawford set resale prices for its distributors; and (4) that Crawford's subsidiary and manufacturing companies engaged in horizontal price fixing. Defendants counterclaimed for malicious prosecution alleging that Gibbons filed this suit to extort a distributorship from Crawford. The district court directed a verdict against plaintiff on all antitrust claims. The defendant's counterclaim went to the jury, who decided for plaintiff. Defendant's motions for judgment n.o.v. and for a new trial were overruled.

I. The Antitrust Claims

A. Standard of Review

Preliminarily, we note that we review plaintiff's claims in light of Boeing Co. v. Shipman, 411 F.2d 365, 374 (5th Cir.1969) (en banc):

On motions for directed verdict and for judgment notwithstanding the verdict the Court should consider all of the evidence--not just that evidence which supports the nonmover's case--but in the light and with all reasonable inferences most favorable to the party opposed to the motion. If the facts and inferences point so strongly and overwhelmingly in favor of one party that the Court believes that reasonable men could not arrive at a contrary verdict, granting of the motions is proper. On the other hand, if there is substantial evidence opposed to the motions, that is, evidence of such quality and weight that reasonable and fair-minded men in the exercise of impartial judgment might reach different conclusions, the motions should be denied and the case submitted to the jury.

B. Concerted Refusal to Deal

Gibbons claims that Crawford, Capital and Read engaged in a concerted refusal to deal. Gibbons argues that because Crawford had an equity interest in the Scottish distributorship, it had a motive to eliminate Gibbons' competition in the North Sea market. Gibbons then points to the specific evidence that Capital and Read refused to deal with Gibbons. ¹

In order to collect damages for a violation of Sec. 1 of the Sherman Act: "plaintiff must prove (1) the existence of an agreement (2) which unreasonably restrains trade (3) to the damage of the plaintiff." Abadir & Co. v. First Mississippi Corp., 651 F.2d 422, 424 (5th Cir.1981). Because we conclude that plaintiff has failed to prove any damage, we affirm the directed verdict.

Section 4 of the Clayton Act [15 U.S.C. Sec. 15] provides that: "[a]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws" may sue and recover treble damages. Thus, Sec. 4 engrafts on any private cause of action proof of some damage or injury. We have described its requirements as:

the plaintiff must prove that the defendants violated the antitrust laws, that this breach caused injury in fact, and, ... the actual dollar amount of the damage.

Jot-Em-Down Store (JEDS) Inc. v. Cotter & Co., 651 F.2d 245, 247 (5th Cir.1981). See Malcolm v. Marathon Oil Co., 642 F.2d 845, 852 (5th Cir.), cert. denied, 454 U.S. 1125, 102 S.Ct. 975, 71 L.Ed.2d 113 (1981).

Traditionally, somewhat different standards apply in proving the fact of damage versus the amount of damage. In In re Plywood Antitrust Litigation, 655 F.2d 627, 635 (5th Cir.1981), cert. granted sub nom Weyerhaeuser Co. v. Lyman Lamb Co., 456 U.S. 971, 102 S.Ct. 2232, 72 L.Ed.2d 844 (1982), we described this difference as, "once anti-trust plaintiffs have proved the fact of damage, their burden on proving the measure of damages becomes lighter." Plaintiff must prove fact of damage by a preponderance of the evidence. See L. Sullivan, Handbook of the Law of Antitrust Sec. 251 (1977) ("There has been no tendency to lighten plaintiff's burden [on the fact of damage]; the preponderance of the evidence rule applies in unqualified form.") Of course, since this case arises on a directed verdict, plaintiff need only show that reasonable minds could differ as to its proof of injury.

We do not think the Supreme Court's recent decision in J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 101 S.Ct. 1923, 68 L.Ed.2d 442 (1981) disturbed these differing standards of proof. The Court vacated our opinion directing a dismissal because of the plaintiff's failure to prove injury. The petitioner argued that its proof should have been evaluated in light of the more lenient standard for proving the amount of damages. The Court vacated because the lenient standard of proof is applied only once an antitrust violation has been proved and no finding on this issue had been made. The Court stated:

If the court determines on remand that respondent did violate the Act, the court should then consider the sufficiency of petitioner's evidence of injury in light of the cases discussed above. We, of course, intimate no views as to how that issue should be decided. We emphasize that even if there has been a violation ... petitioner is not excused from his burden of proving antitrust injury and damages.

It is simply that once a violation has been established, that burden is to some extent lightened.

451 U.S. at 568, 101 S.Ct. at 1930. This language could be construed...