Kay Instrument Sales Co. v. Haldex Aktiebolag, 68 Civ. 1647.

• Decision Date: 11 June 1968
• Docket Number: No. 68 Civ. 1647.,68 Civ. 1647.
• Citation: 296 F. Supp. 578
• Parties: KAY INSTRUMENT SALES CO., Inc. and Nathan A. Karlin, Plaintiffs, v. HALDEX AKTIEBOLAG and Automotive Clock Repairs, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

296 F. Supp. 578

KAY INSTRUMENT SALES CO., Inc. and Nathan A. Karlin, Plaintiffs, v. HALDEX AKTIEBOLAG and Automotive Clock Repairs, Inc., Defendants.

No. 68 Civ. 1647.

United States District Court S. D. New York.

June 11, 1968.

LeBoeuf, Lamb, Leiby & MacRae, New York City, for plaintiffs, H. Richard Wachtel, Grant S. Lewis, New York City, of counsel.

Donovan, Leisure, Newton & Irvine, New York City, for defendants, James V. Hayes, Peter J. Gartland, Louis C. Lustenberger, Jr., New York City, of counsel.

WYATT, District Judge.

This is a motion by plaintiffs Kay Instrument Sales Co., Inc. (Kay) and Nathan A. Karlin (Karlin), president and principal stockholder of Kay, for a preliminary injunction under 15 U.S.C. § 26, a part of the antitrust laws.

Kay is a New York corporation with its business principally in the New York City metropolitan area (the area). Plaintiff Karlin is a resident of New York. The defendants are Haldex Aktiebolag (Haldex), a Swedish corporation, and Automotive Clock Repairs, Inc. (Automotive), a New York corporation.

The complaint has three counts. For present purposes, only the first count need be considered.

The first count charges in substance that Kay has for many years been buying taximeters (meters) from Haldex and has been the exclusive distributor for Haldex meters in the area, that a new type of meter has been developed by Haldex to meet a special need and has also been developed independently by the chief competitor of Haldex in the area, that the new meters are just about to be sold by the two competitors, that Haldex and its competitor have made an agreement fixing the prices at which the new meters are to be sold in the area, that Kay refused to enter this price fixing agreement, that following such refusal by Kay (and presumably because of it) Haldex gave notice of the transfer to Automotive—effective May 30, 1968—of the distributorship for Haldex meters (thereby terminating sales to Kay), and that if this step is carried out Kay's reputation will be destroyed and irreparable injury done to Kay.

The relief demanded in the complaint under the first count is that the Court declare that there has been a violation by defendants of the Sherman Act (15 U.S.C. § 1 and following), that Haldex be enjoined from refusing to sell meters to Kay, that Haldex and Automotive be enjoined from performing any agreement under which Automotive will act as distributor in the area of Haldex meters, and that plaintiffs have judgment for treble damages. Plaintiff has demanded trial by jury.

By the present motion plaintiffs ask for a preliminary injunction (a) enjoining Haldex from refusing to sell meters to Kay and (b) enjoining Haldex and Automotive from performing any agreement under which Automotive will act as distributor of Haldex meters in the area.

At the argument of the motion, neither side asked to present testimony or other evidence at a hearing but rested on the affidavits and other papers submitted. The findings of fact herein are for the most part based therefore on statements in the papers for one side, not denied by the other side. The complaint is not verified but in some respects has been relied on in the findings of fact.

Section 16 of the Clayton Act (15 U.S.C. § 26) authorizes a private person "to sue for and have injunctive relief * * * against threatened loss or damage by a violation of the antitrust laws * * *". The same section authorizes a preliminary injunction. In determining whether to issue a preliminary injunction, however, there is nothing exceptional by reason of the presence of antitrust elements; the normal principles of equity are applicable.

Haldex makes its meters in Sweden and ships them to the United States and many other countries; in the United States the Haldex meters are sold under the name "Halda", Kienzle Uhrenfabrick (Kienzle) makes competing meters in Berlin in West Germany and ships them to the United States and elsewhere; the Kienzle meters are sold under the name "Argo". The distributor of Argo meters in the area is Efficient Instruments Corp. (Efficient or Argo).

Until October 15, 1966, the President ("Managing Director") of Haldex was Klercker; since October 12 or 15, 1966 the President has been Lindbeck. At all relevant times the Export Manager of Haldex has been Pettersson.

Kay is owned by Nathan Karlin and his wife. Kay and its predecessors (also owned by the Karlin family) have been selling meters in the New York area since 1923. Karlin is the President of, and chief figure in, Kay; a younger brother is in the business; a son (a professional engineer) is an officer, has been active in the past in the business and particularly in its technical aspects, and while now employed elsewhere is said to be proposing to reenter the business.

In New York City, the principal part of the area, there are 11,784 taxicabs, of which 4,968 are individually owned (and presumably are normally driven by the owner) and 6,816 are owned in "fleets", that is, a number of cabs are owned by a single owner and driven by employees. The figures have been supplied to the Court by the Hack Owners Bureau of the Police Department. They are not in the papers but are roughly consistent with some estimates therein (Karlin affidavit of April 30, 1968, Ex. E. (p. 3)).

From early 1947 Karlin sold and serviced Haldex meters in the eastern part of the United States. This was done by arrangement with John Ohmer who was distributor for Haldex in the United States. Ohmer died and in 1951 Haldex and Kay made a contract for the sale of meters exclusively to Kay for resale in a territory including the area here in suit. A further agreement was made in 1953 and in or about December 1955 there was an amendment to the contract which, among other things, made it renewable automatically subject to termination on six months notice. No copies of any contracts or amendments are supplied by plaintiffs. The defendants submit a copy of an agreement dated February 25, 1956, which is said to be the last written agreement between Haldex and Kay. Plaintiffs are silent in the face of this evidence and I must conclude therefore that the written agreement of February 25, 1956 was in fact the last agreement between Haldex and Kay. This agreement expired by its terms on September 1, 1957 and had no provision respecting renewal.

Whatever the status of a written agreement between them, Kay has been buying meters from Haldex and no one else and has been reselling and servicing them in the area since at least 1951. Haldex in the same period has sold to no one in the area other than Kay.

Kay has, until at least recently, sold more meters in the area than anyone else. It accounts for about 30% of the meters in taxis in the area. The principal competitor of Key is Efficient which has the exclusive sale of Argo meters, made and shipped here by Kienzle. Kay and Efficient sell "most" of the meters sold in the area.

Apparently the owners of taxi fleets believed that it was a practice of some of their drivers to do "stick-up" driving, that is, to ride a passenger without engaging the meter by "putting the stick down"; this meant that a fare would be collected which, because the meter made no record, could be pocketed by the driver without detection.

At some time early in 1966 some owners told Karlin that if a meter could be devised to prevent the practice described, virtually all fleet owners would buy it.

Karlin told Haldex of the market for an "anti stick-up" meter and "generally described" to Haldex such a meter actuated by pressure of the passenger on the seat. During 1966 Haldex and Kay worked on the problem and were in correspondence about the new meter, as will be more fully described.

Some time before September 1, 1966, Haldex sent one or more models to Kay which installed them for testing in taxicabs. Kay developed the method of installation of the new meters, how to connect the parts to the cab. During the tests, people from Haldex came to observe and to consult with Kay. Kay suggested design changes. The engineer son of Karlin took some interest. Kay showed the model to the fleet owners and according to Haldex made a "fine showing" but, to the dismay of Haldex, promised delivery of the new meters in 30 days from the date of orders. A committee of fleet owners decided to test the Haldex new model for 90 days. Meanwhile Haldex was questioning Kay about how many new meters could be sold; about possible prices, and other information significant for a new product.

About September 1, 1966 or not long thereafter in September, the design and mechanical features of the Haldex new meter were made final.

Some time before September 1, 1966, Kay and Haldex learned that Kienzle was developing an Argo "anti stick-up" meter rumored to operate with electronics. Karlin's engineer son believed that an electronic system could be easily "jammed" by a small, inexpensive device; this was reported to Haldex who realized that it was a competitive disadvantage for Kienzle since it would defeat the whole purpose of the "anti stick-up" meter. Kay also reported to Haldex that two other competitors were working on new meters.

Under date of September 1, 1966 Klercker wrote to Karlin. The tone of the letter is suggestive of a joint venture or partnership of Haldex with Kay in the development and promotion of a new meter. The principal point made by Haldex was that orders from the fleet owners had to be booked by Kay as soon as possible for as many meters as possible. Evidently Haldex felt that Kay could book the orders from the fleet owners even before knowing the price but Kay was promised a price "in a few weeks". As explained to Kay, it was "most important" to Haldex to know that a "substantial" number of new meters would be ordered before Haldex invested "a lot of money" in the new tools required to make the new meters. Haldex felt that Kay should book orders for "successive deliveries" of 300 to 400 meters...