Klor's, Inc. v. Broadway-Hale Stores

• Decision Date: 28 March 1958
• Docket Number: No. 15380.,15380.
• Citation: 255 F.2d 214
• Parties: KLOR'S, INC., Appellant, v. BROADWAY-HALE STORES, INC., et al., Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

255 F.2d 214 (1958)

KLOR'S, INC., Appellant, v. BROADWAY-HALE STORES, INC., et al., Appellees.

No. 15380.

United States Court of Appeals Ninth Circuit.

March 28, 1958.

COPYRIGHT MATERIAL OMITTED

Irvin Goldstein, Maxwell Keith, San Francisco, Cal., for appellant.

Brobeck, Phleger & Harrison, Moses Lasky, San Francisco, Cal., for appellee Broadway-Hale Stores, Inc.

Herbert W. Clark, Morrison, Foerster, Holloway, Shuman & Clark, San Francisco, Cal., for appellees Admiral Corp., Admiral Distributors, Inc., Tappan Stove Co., and O'Keefe & Merritt Co.

Robert E. Burns, San Francisco, Cal., Joseph S. Wright, Edward McCausland, Chicago, Ill., for appellee Zenith Radio Corp.

Claude N. Rosenberg, Bacigalupi, Elkus & Salinger, San Francisco, Cal., for appellee Whirlpool-Seeger Corp.

David B. Gideon, Gibbs & Gideon, San Francisco, Cal., for appellee H. R. Basford Co.

John A. Sutro, Pillsbury, Madison & Sutro, San Francisco, Cal., for appellee Radio Corp. of America.

H. W. Glensor, San Francisco, Cal., for appellee Leo J. Meyberg Co. Gavin, McNab, Schmulowitz, Sommer & Wyman, San Francisco, Cal., for appellees Emerson Radio & Phonograph Corp. and Jefferson-Travis, Inc.

Garrett McEnerney, II, McEnerney & Jacobs, San Francisco, Cal., for appellees Philco Corp. and Philco Distributors, Inc.

Herbert E. Hall, John D. Gallaher, San Francisco, Cal., for appellee Rheem Mfg. Co.

Everett A. Mathews, Cooley, Crowley, Gaither, Godward, Castro & Huddleson, San Francisco, Cal., for appellees General Electric Co. and General Electric Distributing Corp.

Philip S. Ehrlich, Irving Rovens, San Francisco, Cal., for appellees Olympic Radio & Television, Inc. and Olympic Television of Northern Cal.

Before DENMAN, BARNES and HAMLEY, Circuit Judges.

BARNES, Circuit Judge.

I. The Private Plaintiff in Anti-Trust Litigation.

Section 4 of the Clayton Act provides:

"Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor * * * and shall recover threefold the damages by him sustained." 15 U.S.C.A. ? 15.

Passing for the present an examination of what "thing" is forbidden, we note a tendency in some courts to narrow the apparent scope of this statute due to concern with the severity of the penalty.¹

In a recent case this Court said:

"A niggardly construction of the treble damage provisions would do violence to the clear intent of Congress. The private antitrust action is an important and effective method of combating unlawful and destructive business practices. The private suitor complements the Government in enforcing the antitrust laws. The treble damage provision was designed to foster and stimulate the interest of private persons in maintaining a free and competitive economy. Its efficacy should not be weakened by judicial construction." Flintkote Co. v. Lysfjord, 246 F.2d 368, 398, certiorari denied, 1957, 355 U.S. 835, 78 S.Ct. 54, 2 L.Ed.2d 46.

Of more importance is what the Supreme Court has said. In reversing an antitrust case from this Circuit in 1957, that Court admonished the trial and appellate federal courts that:

"Petitioner\'s claim need only be `tested under the Sherman Act\'s general prohibition on unreasonable restraints of trade,\' citing cases and meet the requirement that petitioner has thereby suffered injury."²

With these principles in mind, we proceed to an examination of what is forbidden by the antitrust laws, as stated in Section 4 of the Clayton Act.

The Sherman Act's first and second sections are relied on by the pleadings in this case.³

Does the Sherman Act mean every contract, and every restraint, or must it be interpreted? Must it be aided by a Rule of Reason, and if so, what is that Rule of Reason? The problem is not a new one, nor is it easy. Not only do competent judges disagree ?€” they frequently reach similar destinations by differing circuitous routes.⁴

Suffice it to say that from a period shortly after the early pronouncements of our Supreme Court which made the Sherman Act a comparatively dead law,⁵ succeeding Supreme Court Justices have found it necessary to interpret the precise language used in the Act and determine its proper construction.⁶ Even such a "literalist" as Mr. Justice Peckham eventually came to that view,⁷ at least with regard to what constituted interstate commerce, even if he could not agree with Mr. Justice White⁸ on what was meant by "every restraint." And, although the statutory language "is literally all encompassing, the courts have construed it as precluding only those contracts or combinations which `unreasonably' restrain competition."^8a

With this brief introduction, let us turn to the pleadings and evidence of this case.

II. The Pleadings.

Plaintiff corporation sues many defendants, claiming a cause of action under Sections 4 and 16 of the Clayton Act,⁹ by reason of defendants' alleged violation of Sections 1 and 2 of the Sherman Act.¹⁰

The complaint alleges plaintiff is the owner and operator of a retail store engaged in the business in San Francisco of selling radios, television sets, clothes washers, refrigerators, electric and gas stoves, phonographs and various electrical appliances. Plaintiff charges defendant Broadway-Hale Stores, Inc., a corporation, is a competitor in the purchase and sale of such household appliances, operating a chain of stores in the western states and one specific store in the general vicinity of plaintiff's retail store in the Mission District area of San Francisco, California. The eighteen other defendants named are ten leading manufacturers¹¹ and eight distributors¹² of such household appliances mentioned above.

Plaintiff charges that all defendants beginning prior to 1952 "have restrained trade and commerce in the interstate distribution and sale" of the described types of goods in the San Francisco area "by contracting, combining, conspiring together, and each with the other in restraint and monopoly of such trade and commerce" and "have substantially lessened, limited, and restrained competition in said trade and commerce."¹³

Various alleged discriminations in sale, supply, price terms, etc., are charged in count one of the complaint as part of the conspiracy. Counts two through thirty-one charge violations of the Robinson-Patman Act¹⁴ and counts thirty-two through forty-one charge violations of ? 13(f) of the Robinson-Patman Act¹⁵ ?€” discrimination in price, services, etc.

III. Proceedings in the District Court.

By pre-trial order count one was limited to a single conspiracy charging a Sherman Act violation.¹⁶

Subsequently, under Federal Rules of Civil Procedure 42(b), 28 U.S.C.A., the trial court ruled:

"Count one of the complaint and the claim for relief tendered thereby are to be treated in all respects as if they constituted a separate action."

All but one of the defendants (18 of 19) then moved to dismiss count one of the complaint,

"* * * for failure to state a claim upon which relief can be granted, and for summary judgment on said Count One on the ground that there is no genuine issue as to any material fact and the moving parties are entitled to a judgment as a matter of law."

In support of this motion, the moving parties submitted a dozen affidavits. Appellant stood on the pleadings and papers on file, filing no documents in opposition to the motion. It should be noted here that the court below did not rule on the pleadings nor grant the motion to dismiss by reason of any failure therein. While a motion to dismiss was made, it was apparently passed over so that the motion for summary judgment could be determined. That latter motion having been granted, it was necessarily dispositive of the motion to dismiss.

The District Court granted the motion for summary judgment by preliminary order and subsequent formal judgment.¹⁷ The preliminary order is short, and reads as follows:

"It appears from the allegations of count one of the complaint and from the undisputed affidavits supporting the motion for summary judgment that there is no genuine issue of fact respecting the claim for relief tendered by count one of the complaint.

"Count one is not a cause of action under the Sherman Anti-Trust Act. It is not concerned with private damages caused by a public wrong proscribed by the Act.

"It is just the case of a retail store in the Mission District of San Francisco ?€” one of hundreds in the city engaged in selling the same kind of merchandise ?€” which has a plaint that certain supplier defendants won\'t sell it some merchandise, allegedly at the behest of one of its competitors. It is purely a private quarrel, (perhaps otherwise legally remediable) arising out of some undisclosed cause ?€” the nature of which we may suspect, but do not know.

"There is not the slightest basis either in substantiality or law for the exercise of our jurisdiction.

"The motions are granted. * *"

This appeal is from the motion granting summary judgment. Count one alone is involved. The other forty counts are not before us.

IV. The Issues.

Appellant makes but one specification of error ?€” namely, that it was error to grant a motion for judgment or dismiss a complaint seeking damages under ? 4 of the Clayton Act based upon an alleged violation of the Sherman Act plus consequent damage to plaintiff because the complaint had failed to allege and plaintiff had failed to prove, as an additional element, a "public injury."

Appellees do not agree that the trial court's action (and alleged error) can be so described. They agree that if there has been alleged a violation of the Sherman Act, plus consequent damage to a private plaintiff, a cause of action is stated. They claim a violation of the Sherman Act was not pleaded, and more important, not established by the evidence before the court on the motion to dismiss. This was because the restraint of trade relied on was not a restraint of trade recognized as such at common law which constitutes a per se...