Johnson v. Joseph Schlitz Brewing Co.

Decision Date21 May 1940
Docket NumberNo. 25.,25.
Citation33 F. Supp. 176
CourtU.S. District Court — Eastern District of Tennessee


Whitaker & Whitaker, of Chattanooga, Tenn., for plaintiff.

John A. Chambliss, of Chattanooga, Tenn., and Walter D. Corrigan, Kenneth F. Webster, and Francis H. Parson, all of Milwaukee, Wis., for defendant.

DARR, District Judge.

In the first cause of action plaintiff, a local beer distributor, sues defendant Brewing Company alleging a conspiracy between defendant and certain other brewing companies in violation of Section 1 of the Sherman Anti-Trust Act (26 Stat. 209; 15 U.S.C. § 1, 15 U.S.C.A. § 1), and asks for triple damages in accordance with Section 7 (26 Stat. 210; 15 U.S.C.A. § 15 note) of that act. The pertinent provisions of Sections 1 and 7 of the Sherman Act read as follows:

"1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal."

"7. Any person who shall be injured in his business or property by any other person or corporation by reason of anything forbidden or declared to be unlawful by this act, may sue therefor in any district court of the United States * * * and shall recover threefold the damages by him sustained, and the costs of suit, including a reasonable attorney's fee."

The jury's verdict was based on the first cause of action, without regard to the second and third causes of action, and no decision is necessary with respect to the two latter causes of action.

The facts alleged by the plaintiff are that the defendant, Pabst Brewing Company, and Anheuser-Busch, Inc., three of the largest domestic brewers of beer, entered into a conspiracy whereby each of the three agreed to refrain from selling or soliciting the sale of draft beer to the exclusive draft beer retail accounts of either of the other parties to the conspiracy. By reason of this conspiracy, plaintiff claims that he was injured in his business because the operation of the conspiracy precluded him from selling draft beer to a number of retailers in his distributing area. Plaintiff offered evidence which, if believed by the jury, sustained these allegations.

At the close of the evidence defendant moved for a directed verdict, which was denied, and this court submitted the case to the jury subject to the right to reconsider all questions of law after verdict rendered, as provided by Rule 50 (b), Rules of Civil Procedure, 28 U.S.C.A. following section 723c. The jury found for the plaintiff in the sum of $5,000. Defendant has now moved for judgment non obstante veredicto or, in the alternative, for a new trial. Elaborate briefs and reply briefs have been submitted by both parties and have been carefully considered. The case is now ready for decision.

At the threshold, the court is met by an incidental question. At one point in his redirect examination plaintiff testified to a certain agreement between himself and defendant whereby defendant would purchase certain bar fixtures from Pabst and leave them in a tavern in Chattanooga to whose proprietor plaintiff could then sell draft beer. This is alleged to involve ownership of retail equipment by a brewer in violation of Chapter 69 of the Public Laws of Tennessee of 1933, and of the Federal Alcohol Administration Act, 27 U.S.C. §§ 205, 207, 27 U.S.C.A. §§ 205, 207. By its provisions the federal act in this respect is made to conform altogether to the state law. 27 U.S.C. § 205(b) (3), 27 U.S.C.A. § 205(b) (3). It is perhaps doubtful under Tennessee law whether the proposed transaction, as to which the testimony is conflicting, would be unlawful. Cf. Cubbins v. Ayres, 4 Lea, Tenn., 329; Hickman v. Booth, 131 Tenn. 32, 34, 173 S.W. 438; State v. Smith, 5 Humph., Tenn., 394, 395, 396, and exhibits in this case setting forth regulations and opinions under Chapter 69 above. Defendant invokes the well-defined rule that parties to an illegal agreement will not be aided by the courts. Plaintiff contends that there was no illegal agreement. Assuming without deciding that the alleged agreement was illegal, it is clear that plaintiff does not sue upon any such agreement but upon defendant's alleged violation of the Sherman Act, and plaintiff's damage was occasioned by such alleged violation of the act, rather than by any violation of the "agreement". Therefore, the "agreement" cannot be used to defeat plaintiff's right of action based upon the overriding statutory policy of the Sherman Act, if that right of recovery is otherwise clear. Cf. United States v. Socony-Vacuum Oil Co., Inc., 60 S.Ct. 811, 84 L.Ed. ___, decided May 6, 1940.

But if it could be argued that the question of contract might effect the amount of damages, it is to be remembered that the court instructed the jury to find for the defendant if they found its refusal to permit plaintiff to sell was because of defendant's policy against subsidization whether or not subsidization was illegal. This direction was the most favorable defendant could have asked because it directed the jury to find for defendant whether or not the "agreement" was legal or illegal, and the jury could have found for plaintiff as they did only by finding that the "agreement" played no part in defendant's refusal to permit plaintiff to sell, but that such failure was caused solely by defendant's adherence to its illegal conspiracy. Hence defendant's reliance upon the illegal "agreement" must fail.

Defendant next urges that there is no evidence of any conspiracy between it, Pabst, and Anheuser-Busch, Inc. Short shrift may be given this contention. There is a clear conflict in the evidence, and the jury found this point in plaintiff's favor. Its verdict is conclusive. Defendant's reliance on United States v. Socony-Vacuum Oil Co., 7 Cir., 1939, 105 F.2d 809, is ill-timed in view of its recent reversal by the Supreme Court. United States v. Socony-Vacuum Oil Co., 60 S.Ct. 811, 84 L.Ed. ___, decided May 6, 1940. That decision clearly shows that plaintiff's evidence here is competent and the jury's verdict therefore determines the existence of an illegal conspiracy.

Defendant also denies that interstate commerce is here involved, saying that any restraint here "was merely a restraint aimed at a local enterprise and not in any manner at interstate commerce". In view of the fact that the defendant is shown to be systematically engaged in interstate commerce and was found by the jury to have entered a conspiracy to stifle competition throughout the country, this is a startling proposition and if accepted would nullify the Sherman Act. Ample authority exists against it, however, authority which leaves no doubt but that defendant acted in restraint of interstate commerce. Thus defendant's contention was squarely ruled against in Steers v. United States, 6 Cir., 1911, 192 F. 1, referred to with approval upon this exact point by the Supreme Court in its recent decision in United States v. Socony-Vacuum Oil Company, supra, at footnote 59, and quoted with approval in O'Brien v. United States, 6 Cir., 1923, 290 F. 185, 187, which involved the shipment of the single steel billet. In the latter case the court said: "It is also urged that the amount of commerce involved was too insignificant to justify invoking the Sherman Act; but we hold, as we did in Steers v. United States, 192 F. 1, 112 C.C.A. 423, that the existence of the offense is found not in the amount of commerce restrained, but in the direct and absolute character of the restraint."

To the same effect, see, also, the following authorities: Indiana Farmer's Guide Pub. Co. v. Prairie Farmer Pub. Co., 293 U.S. 268, 55 S.Ct. 182, 79 L.Ed. 356; National Labor Relations Board v. Fainblatt, 306 U.S. 601, 606, 59 S.Ct. 668, 83 L.Ed. 1014; United States v. Patterson, D.C., 201 F. 697, reversed on other grounds but approved on this exact point by the Circuit Court of Appeals in 6 Cir., 1915, 222 F. 599, certiorari denied, 238 U.S. 635, 35 S.Ct. 939, 59 L.Ed. 1499; Hicks v. Bekins Co., 9 Cir., 1937, 87 F.2d 583; Buyer v. Guillan, 2 Cir., 1921, 271 F. 65; Oxford Varnish Corp. v. Ault & Wiborg Corp., 6 Cir., 1936, 83 F.2d 764.

Against these authorities defendant relies only upon one appellate court decision (Leader v. Apex Hosiery Co., 3 Cir., 1939, 108 F.2d 71) and that is not final, argued in the Supreme Court on April 2, 1940. That case involves several hotly controverted and uncertain points as to the application of the Sherman Act to labor disputes in view of Sections 6 and 20 of the Clayton Act (38 Stat. 731, 738; 15 U.S.C. § 17, 15 U. S.C.A. § 17, 29 U.S.C. § 52, 29 U.S.C.A. § 52) and of the provisions of the Norris-LaGuardia Act (47 Stat. 70, 29 U.S.C. §§ 101-115, 29 U.S.C.A. §§ 101-115) but even if affirmed, it is now apparent that the Supreme Court will not approve the interstate commerce theory of that case (108 F.2d at pages 79, 80 which portion of the opinion defendant alone relies upon here) in view of the recent explicit declaration upon this point in United States v. Socony-Vacuum Oil Co., supra 60 S.Ct. 845, in footnote 59, that "the amount of interstate or foreign trade involved is not material (Montague & Co. v. Lowry, 193 U.S. 38, 24 S.Ct. 307, 48 L.Ed. 608), since § 1 of the Act brands as illegal the character of the restraint not the amount of commerce affected. Steers v. United States, 6 Cir., 192 F. 1, 5; Patterson v. United States, 6 Cir., 222 F. 599, 618, 619". Therefore, this contention of defendant must be overruled.1

Defendant next contends that plaintiff failed to prove a valid and enforceable contract between plaintiff and defendant. Here defendant again confuses this first cause of action under the Sherman Act with a suit on a contract. Once an illegal conspiracy in violation of the Sherman Act is shown, all the plaintiff need do is to show his damages. Montague v. Lowry, 193 U.S. 38, ...

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    ...the conduct of the plaintiff prior to the time the cause of action arose." This idea was carried further in Johnson v. Joseph Schlitz Brewing Co., D.C.E.D. Tenn., 33 F.Supp. 176, 179 — affirmed on opinion below, Jos. Schlitz Brewing Co. v. Johnson, 6 Cir., 123 F.2d 1016 — to hold that an al......
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