McCabe's Furniture, Inc. v. La-Z-Boy Chair Co., LA-Z-BOY

• Decision Date: 13 August 1986
• Docket Number: LA-Z-BOY,No. 85-1825,85-1825
• Parties: 1986-2 Trade Cases 67,224 McCABE'S FURNITURE, INC., Appellee, v.CHAIR CO., Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 323

798 F.2d 323

1986-2 Trade Cases 67,224

McCABE'S FURNITURE, INC., Appellee, v. LA-Z-BOY CHAIR CO., Appellant.

No. 85-1825.

United States Court of Appeals Eighth Circuit.

Submitted Jan. 16, 1986.

Decided Aug. 13, 1986.

Peter G. Kumpe, Little Rock, Ark., for appellant.

Merl O. Barnes, San Francisco, Cal., for appellee.

Before McMILLIAN and JOHN R. GIBSON, Circuit Judges, and MURPHY, ^* District Judge.

JOHN R. GIBSON, Circuit Judge.

La-Z-Boy Chair Company, a manufacturer, appeals from a jury verdict awarding $90,000 in treble damage to McCabe's Furniture, a terminated dealer. The jury found that La-Z-Boy had conspired with Cyrus Opferman, owner of a La-Z-Boy Showcase Shoppe competing with McCabe's, to maintain resale prices, a per se violation of section one of the Sherman Act, 15 U.S.C. Sec. 1 et seq. (1982). La-Z-Boy appeals the district court's denial of its motion for judgment notwithstanding the verdict, arguing that McCabe's presented insufficient evidence of a vertical price maintenance conspiracy under the standard set forth by the Supreme Court in Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984). La-Z-Boy also claims that the jury was not properly instructed and that the damage award was excessive. We conclude that McCabe's produced sufficient evidence that La-Z-Boy and Opferman conspired, but failed to produce sufficient evidence that they conspired to maintain the price of La-Z-Boy products in the Little Rock market, the basis upon which McCabe's pleaded and presented its case. Therefore, we reverse the judgment of the district court.

La-Z-Boy manufactures furniture and distributes its products throughout the United States in two ways. Some of La-Z-Boy's sales are made through La-Z-Boy Showcase Shoppes, independently owned and operated retail outlets which exclusively sell La-Z-Boy products. Showcase Shoppe owners agree to advertise, to maintain an outlet with certain point-of-purchase amenities, and to offer repair service. In exchange for providing these services, Showcase Shoppe owners are licensed to use the La-Z-Boy name. La-Z-Boy also deals with department stores and retail furniture stores. These independent dealers carry a variety of furniture brands and make no contract to promote or service the La-Z-Boy line.

McCabe's Furniture is one of about a half-dozen independent retail furniture stores selling La-Z-Boy products in Little Rock, Arkansas. Until February 1984 when La-Z-Boy terminated the relationship, McCabe's had been dealing with La-Z-Boy for approximately 15 years. Fred McCabe, owner of McCabe's, testified that his marketing approach consistently had been to contain overhead costs and pass the savings to consumers in the form of low prices. McCabe testified that, despite his discounting, La-Z-Boy had never threatened termination, although it had occasionally urged him to raise his prices. La-Z-Boy concedes that it suggests retail prices to all its dealers, but claims to make no effort to police those prices. The evidence confirms that some Showcase Shoppes sell below La-Z-Boy's suggested retail price.

La-Z-Boy also distributes in Little Rock through a La-Z-Boy Showcase Shoppe, owned and operated by Cyrus Opferman. Operfman opened the first Little Rock Showcase Shoppe in 1978, and opened a second, in North Little Rock, in 1981. Until the termination, McCabe's Furniture and Opferman's Showcase Shoppes were competitors on the La-Z-Boy line.

In 1982, faced with a decline in sales, Opferman began complaining to La-Z-Boy representatives about competing dealers, principally McCabe's and Crafton's, another independent dealer some 18 miles outside Little Rock. Opferman testified that he complained that his competitors did not advertise the La-Z-Boy product, that their display of the product tarnished the La-Z-Boy image, and that they provided no repair service. He objected to the competitors' freeriding on his expenditures and efforts. He also complained that their prices were too low, and that their low prices were cutting into his sales. Opferman testified that he voiced these complaints frequently and continually until he learned from La-Z-Boy of McCabe's termination. He added, however, that upon lodging these complaints, he had never received any kind of assent from La-Z-Boy to take action against McCabe's.

On November 4, 1983, Paul Wright, La-Z-Boy's sales manager for the region including Arkansas, wrote a memorandum to Wayne Jacobs, La-Z-Boy's Arkansas factory representative. The memo explained that Opferman would be closing both his Showcase Shoppes and relocating in a single new Shoppe in Little Rock, and that he deserved "to have every break possible to make this new Shoppe successful." Jacobs was instructed "to look carefully at the distribution in Little Rock to make sure that the accounts there will allow Cy to make a decent profit on our product line. The two accounts that come to mind that have caused Cy problems in the past," Wright's memo concluded, "are McCabe's Furniture and Crafton's Furniture." This memo also was sent to Patrick Norton, senior vice president of sales for La-Z-Boy, and Kurt Darrow, who later replaced Wright as sales manager for the region including Arkansas.

The decision to terminate McCabe's ultimately was made by Norton. Norton testified that when he joined La-Z-Boy in 1981, its sales throughout the nation were declining. He believed that the decline stemmed from La-Z-Boy's decreased ability to attract the consumer willing to spend the extra money to buy La-Z-Boy's comparatively expensive product. Norton reasoned that La-Z-Boy could most effectively improve its market position through nonprice competition with lower priced brands. He thus instituted a nationwide program to upgrade the retail promotion and service of La-Z-Boy furniture. This strategy, according to Norton, had succeeded in recapturing for La-Z-Boy a larger share of the furniture market.

Aware that despite nationwide sales growth, Little Rock sales continued to slip, Norton sent Kurt Darrow to inspect the Little Rock retail outlets. Darrow testified that he visited current and prospective La-Z-Boy dealers. Darrow was driven to McCabe's by Opferman, and anonymously inspected the store while Opferman waited outside. He testified, however, as did Opferman, that the two did not discuss the purpose of Darrow's visit. Darrow reported to Norton, in a memo dated of January 24, 1984, that McCabe's was a "very low end store" that was "preventing [La-Z-Boy] from developing other quality distribution in the Little Rock market." Darrow's memo further advised that McCabe's "should be closed prior to moving the Showcase Shoppe." Norton testified that based on Darrow's observations, and on his experience with the nationwide program, he decided that the best way to support Opferman's promotional and service efforts, and to enhance La-Z-Boy's attractiveness to prospective high-end independent retailers in Little Rock, was to terminate La-Z-Boy's dealings with McCabe's.

When McCabe was informed by letter from Norton of the termination, he phoned Wayne Jacobs to ask why he had been terminated. McCabe testified that "the only reason [Jacobs] could figure out that they were terminating me is to give the La-Z-Boy Shoppe some relief." Opferman testified that he did not learn of McCabe's termination until Paul Wright informed him by telephone in March 1984. According to Opferman, Wright reported McCabe's termination by saying, " 'that problem had been taken care of.' " Finally, Darrow testified that although La-Z-Boy had sought to replace McCabe's with a more upscale retail outlet, an intention he expressed in the memo to Norton, and in a second memo several months later, at the time of trial, 15 months after the McCabe's dealership was terminated, no new dealer had been obtained.

After a one day trial, the jury returned a verdict against La-Z-Boy for $30,000. La-Z-Boy moved for a judgment notwithstanding the verdict on the ground that the evidence was not sufficient for a reasonable jury to find the existence of a vertical price conspiracy between La-Z-Boy and Opferman which resulted in McCabe's termination. The district court denied the motion and ordered the award trebled to $90,000. This appeal followed.

In reviewing the denial of a motion for judgment notwithstanding a jury verdict, we must view the evidence and all reasonable inferences in the light most favorable to the party who prevailed before the jury. Pumps & Power Co. v. Southern States Industries, 787 F.2d 1252, 1258 (8th Cir.1986); Giordano v. Lee, 434 F.2d 1227, 1231 (8th Cir.1970), cert. denied, 403 U.S. 931, 91 S.Ct. 2250, 29 L.Ed.2d 709 (1971). In so doing, we

(1) resolve direct factual conflicts in favor of the nonmovant, (2) assume as true all facts supporting the nonmovant which the evidence tends to prove, (3) give the nonmovant the benefit of all reasonable inferences, and (4) deny the motion if the evidence so viewed would allow reasonable jurors to differ as to the conclusions that could be drawn.

Dace v. ACF Industries, Inc., 722 F.2d 374, 375 (8th Cir.1983), modified per curiam, 728 F.2d 976 (8th Cir.1984). In addition, we observe that the Supreme Court has urged the lower courts, when adjudicating claims of insufficient evidence in antitrust cases, to evaluate the evidence as a whole, and to refrain from "tightly compartmentalizing the various factual components and wiping the slate clean after scrutiny of each." Continental Ore Co. v. Union Carbide and Carbon Corp., 370 U.S. 690, 699, 82 S.Ct. 1404, 1410, 8 L.Ed.2d 777 (1962); see also Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962) (emphasizing that in antitrust cases, motive and intent are important issues).

In Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984), a dealer termination case like this one, the...