Mathews Conveyor Co. v. Palmer Bee Co.

• Decision Date: 15 October 1941
• Docket Number: No. 927.,927.
• Citation: 41 F. Supp. 401
• Parties: MATHEWS CONVEYOR CO. v. PALMER BEE CO.
• Court: U.S. District Court — Western District of Michigan

41 F. Supp. 401

MATHEWS CONVEYOR CO. v. PALMER BEE CO.

No. 927.

District Court, E. D. Michigan, S. D.

October 15, 1941.

COPYRIGHT MATERIAL OMITTED

Harold Olsen, of Chicago, Ill. (Whittemore, Hulbert & Belknap, of Detroit, Mich., of counsel), for plaintiff.

Bodman, Longley, Bogle, Middleton & Farley, of Detroit, Mich., for defendant.

LEDERLE, District Judge.

1. Plaintiff, Mathews Conveyor Company, is a Pennsylvania Corporation. Defendant, Palmer-Bee Company, is a Michigan Corporation.

2. For convenience and clarity, this litigation, based on a lengthy and complicated complaint, will be considered under four divisions, viz.:

A. An accounting for profits derived from a sale made by the defendant at the time the plaintiff claims the defendant was acting as its agent. The amount involved in this controversy exceeds the sum of three thousand ($3,000) dollars, exclusive of interest and costs. Jurisdiction is based upon diversity of citizenship.

B. Unfair competition. The amount involved in this controversy exceeds the sum of three thousand ($3,000) dollars, exclusive of interest and costs, and jurisdiction is based upon diversity of citizenship.

C. Copyright infringement of portions of two of the plaintiff's catalogs.

D. Infringement of the following United States patents:

1,720,255, issued to Charles A. Adams, July 9, 1929.

1,876,534, issued to Charles A. Adams, September 13, 1932.

2,023,718, issued to Charles A. Adams, December 10, 1935.

2,077,188, issued to H. M. Rishel, April 13, 1937.

Throughout the trial, for convenience, these patents were referred to as the "255 patent", "534 patent", "718 patent", and the "188 patent".

3. The defendant filed a motion for a summary judgment in accordance with the provisions of Rule 56 of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c. After an extended hearing, this motion was overruled.

4. In accordance with the custom in force in this court for some time, both parties were asked to prepare and file proposed findings prior to the pre-trial hearing, as provided for in Rule 16 of the Rules of Civil Procedure. Both parties complied with this request, and at the pre-trial hearing, the parties reached an agreement and a formal order was entered providing that at the time of the trial no further proof need be taken as to the agreed facts.

Findings 5 to 49, both inclusive, are based directly upon this pre-trial order, dated October 23, 1939.

5. Plaintiff, Mathews Conveyor Company, is a manufacturer of conveyor equipment of the type known as "Gravity Roller Conveyors", such as are widely used in industrial plants for conveying articles from one place to another.

6. Plaintiff's predecessor in business, Mathews Gravity Carrier Company, engaged in the manufacture of Gravity Roller Conveyors as early as 1905.

7. Defendant, Palmer-Bee Company, is a manufacturer and jobber of elevating and power transmitting machinery, mill supplies, and structural steel.

8. Defendant, as early as 1915, and continuing up to the present time, has sold, distributed and installed plaintiff's products.

9. On or about May 1, 1920, the plaintiff and defendant entered into an oral contract, the terms of which were later reduced to writing in a letter dated May 4, 1920, written by the defendant company by its president and general manager, William E. Bee.

10. The letter referred to in Finding No. 9, reads as follows:

"May 4, 1920. "Mathews Gravity Carrier Co. "Ellwood City, Penn.

"Gentlemen:

"Confirming conversation and verbal agreement entered into at your office April 30th, wherein it was understood and agreed that you appoint Palmer-Bee Co., Detroit, Mich. as your exclusive sales agents and representatives for the State of Michigan, (Upper Peninsula not included) for the complete sales of your products; you to furnish catalogs and other printed matter bearing our imprint, that will fully describe and be of assistance in the promotion of sales of your products.

"You are also to furnish each of our salesmen engineering data sheets as pertains to your products and render such engineering assistance as you may be called upon from time to time.

"Prices of your products to us are subject to changes of market conditions, but at no time are they to exceed the lowest net cost to any of your other agents.

"You are also to protect us on quotations of record in our office by increased cost or ample notification for withdrawal of quotation.

"In consideration of the above, the Palmer-Bee Company agree to devote their best efforts to the sale of your products, keeping you fully advised as to the progress of our Sales Dept. on the more important prospects. Also, to render to you, if you desire it, a monthly statement of sales, giving you the name of purchaser, location and list of materials purchased.

"We also agree not to sell any other make of Gravity Conveyor.

"Prices are subject to market conditions as above outlined. Terms of payment — Thirty days net, 2% cash discount, payable tenth of month following purchase.

"This agreement may be cancelled by either party on sixty, (60) days notice in writing.

"Yours very truly "Palmer-Bee Company "(Signed) Wm. E. Bee "President & Manager "_______ "_______."

11. Acting under this understanding, the Mathews Company did supply defendant with advertising material, some of which listed the Palmer-Bee Company by name under the heading, "Branch Offices and Representatives", and some of which merely contained a list of cities under the name of the Mathews Company. On the latter a Palmer-Bee Company sticker was affixed either by plaintiff or defendant.

12. During the years from 1920 until September, 1937, when plaintiff cancelled the agreement, the defendant sold over one million dollars worth of plaintiff's products.

13. During the existence of the socalled agreement referred to in Finding Nos. 9 and 10, the Palmer-Bee Company dealt directly with its customers in securing orders and delivering and installing the Mathews products. It issued its purchase order to the Mathews Company, specifying the goods and the price to be paid therefor. If the goods were to be shipped to the customers, rather than the Palmer-Bee Company, Palmer-Bee Company tags, packing lists, and bills of lading were used. The goods so ordered were invoiced by the Mathews Company to the Palmer-Bee Company, f. o. b. Ellwood City, Pennsylvania, and the Palmer-Bee Company paid the Mathews Company direct. Palmer-Bee Company, in turn, billed the customer directly in its own name for the goods, assumed the credit risk for payment, obtained full title upon the shipment by the Mathews Company, and exercised complete control over the goods, including all liability incident to the installation and erection thereof.

14. During the period, May 1, 1920, to September 1, 1937, the defendant received from the plaintiff a commission upon all sales it made of the plaintiff's products.

15. During the period, May 1, 1920, to September 1, 1937, the defendant sold plaintiff's products at prices established by plaintiff and departed from such prices only upon approval by the plaintiff at the defendant's request.

16. During the period, May 1, 1920, to September 1, 1937, defendant held itself out to the public as the representative or jobber of the plaintiff in the State of Michigan.

17. During the period, May 1, 1920, to September 1, 1937, the defendant was engaged in its own behalf in procuring business for the plaintiff's products.

18. From about 1924 to this date, the defendant has distributed to the trade and is still distributing to the trade a catalog known as Catalog No. 40, which upon pages 555 to 566, inclusive, illustrates and describes the products of the plaintiff under the plaintiff's name. In this catalog defendant announced to the public on pages 4 and 5 that it conducts an extensive jobbing business and under the heading "As Jobbers" lists the name of the plaintiff along with twenty-seven other manufacturers. The catalog, in addition to illustrating and describing the plaintiff's products under the plaintiff's name, similarly illustrates and describes the products of the twenty-seven other manufacturers and all the products of the defendant's own manufacture.

19. From December, 1927, to and including June, 1937, the name of the plaintiff appeared in the Detroit telephone directories under the same address and with the same telephone number as the defendant.

20. It was well known to the trade and the purchasing public during the period May 1, 1920, to September 1, 1937, that the defendant represented the plaintiff in the State of Michigan and the trade and purchasing public ordered plaintiff's products from the defendant, sometimes addressing such orders to the plaintiff at the defendant's address and at other times addressing such orders directly to the defendant.

21. In 1937 defendant learned that the Chevrolet Division of the General Motors Corporation was to build a new plant at Tonawanda, New York, which would require several large installations of different types of conveyors, including gravity roller conveyors. The Palmer-Bee Company made an engineering survey of this proposed installation, and submitted a proposal for the furnishing and erection of a large part of the gravity roller conveyor, and ancillary equipment, particularly specifying Mathews equipment as to the major portion thereof.

22. The General Motors Corporation, through its Chevrolet Division, accepted the defendant's proposal and issued its purchase order to the defendant, Palmer-Bee Company, copying the latter proposal verbatim, including the specifications for Mathews equipment.

23. After the receipt of Chevrolet's purchase order, defendant's president, George A. Bee, visited the plant superintendent of Chevrolet at Tonawanda on August 11, 1937, and made a counter-proposal to fill the order for roller conveyors specified as Mathews in the purchase order with the goods of the...