Kellogg Co. v. National Biscuit Co.

• Decision Date: 18 June 1934
• Docket Number: No. 272.,272.
• Citation: 71 F.2d 662
• Parties: KELLOGG CO. v. NATIONAL BISCUIT CO.
• Court: U.S. Court of Appeals — Second Circuit

71 F.2d 662 (1934)

KELLOGG CO. v. NATIONAL BISCUIT CO.

No. 272.

Circuit Court of Appeals, Second Circuit.

June 18, 1934.

Crichton Clarke, of New York City, for appellant.

Cooper, Kerr & Dunham, of New York City (Drury W. Cooper and Charles A. Vilas, both of New York City, of counsel), for appellee.

Before MANTON, AUGUSTUS N. HAND, and CHASE, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge.

It might at first seem that this action against the National Biscuit Company by a competitor to recover treble damages under section 4 of the Clayton Act (15 USCA § 15) was without foundation, but we are on the whole inclined to think that enough is set forth in the complaint to withstand demurrer and to require the defendant to submit to trial.

The charge in general is of an unlawful attempt to monopolize the business of selling shredded wheat. This charge is confused with claims that the defendant is responsible for acts done by Shredded Wheat Company, a predecessor corporation from which it purchased a business in shredded wheat, together with certain trade-marks and property. It is nowhere alleged that this purchase involved a merger, consolidation, or other method of succession whereby the defendant would become responsible for the liabilities in contract or tort of its predecessor. For all we know, it acquired the properties for cash and succeeded to none of the liabilities of Shredded Wheat Company.

A great part of the verbose and at times confused allegations of the amended complaint relates to transactions of defendant's predecessor which it is sought to impute to the defendant by alleging that it "has ratified, adopted and still continues the before described scheme of its predecessor to suppress competition in said interstate shredded wheat business and thereby secure to itself a complete monopoly therein. * * *" As the complaint stands, this portion of what may be termed the prologue is almost entirely irrelevant to a cause of action that only arose after the defendant had purchased the business and trade-marks of Shredded Wheat Company in 1930, and has no application except as it contains allegations of vague import that since the purchase the defendant has continued the course of conduct of its predecessor. But the alleged torts of the defendant should not rest on indefinite comparisons with another corporation, but on precise allegations as to its own actions.

Clause 43 and the clauses following, however, seem to contain certain allegations pertinent to the cause of action asserted. They state that about the year 1930 the defendant purchased the going business and property of the Shredded Wheat Company and directed its salesmen to slander plaintiff and its product by telling dealers that its product is an inferior and outlaw product, that it is not shredded wheat, but a spurious and inferior imitation and that the defendant alone has the exclusive legal right of making and selling shredded wheat. The complaint further alleges threats that dealers will be prosecuted as contributory infringers for buying, handling, and vending plaintiff's product and must cease on pain of being unable to procure other of defendant's products, that they will be boycotted and held up to the trade as infringers and conspirators with the maker of outlaw goods, and that they must break their contracts with plaintiff. It is further alleged that through newspapers, magazines, and trade journals of the nation a similar false, intimidating, and libelous campaign of propaganda has been directed by defendant against plaintiff, its product and dealers, defendant at times basing such propaganda upon false claims of exclusive rights to expired patent processes and trade-mark words, all for the purpose of destroying plaintiff's competitive business in shredded wheat biscuits and of exclusively appropriating the same to itself. The plaintiff likewise alleges that the defendant, as a further step in its monopolistic scheme, in bad faith instituted, in June, 1932, an "unwarranted, vexatious and unjustifiable" action in the United States District Court for the District of Delaware to restrain the manufacture of shredded wheat in the form and shape shown in the expired design patent formerly belonging to defendant's predecessor and to enjoin the use of the words "shredded wheat" in any way, and that it has threatened a large number of customers of plaintiff through the several states whose names are set forth, warning them that plaintiff's product is not shredded wheat and that defendant has exclusive right to sell that product. These things are alleged to have been done by the defendant, though it knew that its exclusive monopoly and trade-mark claims were invalid, in order to restrain competition and secure a monopoly in the business of shredded wheat. It is further alleged that defendant, in the year 1932, as a part of its unlawful scheme, marketed a new size of biscuit substantially indistinguishable from the biscuit which plaintiff had designed in order to differentiate its goods from those of defendant, and that this was done in order that defendant's biscuit might be substituted for plaintiff's biscuit and palmed off as such. The complaint further alleges that, by reason of the vexatious suit and the attempted monopoly and false propaganda, plaintiff has been damaged in its business and property in a sum in excess of $1,000,000.

Reading the complaint as a whole, it seems probable that plaintiff little relies on the simple allegations that defendant has falsely represented that plaintiff's goods are of inferior quality and infringe process patents, or on threats to do no business with concerns that are customers of plaintiff, but really bases its cause of action on the ground that defendant has asserted to the trade that plaintiff could not make its biscuits in the shape of defendant's and could not use the words "shredded wheat" in any way and has made this assertion in spite of the fact that defendant has no valid trade-mark or other rights either in the name "shredded wheat" or in the shape of the biscuits it sells and was aware of this fact. This interference with plaintiff's use of descriptive words and forms of shredded...