Michelman v. Clark-Schwebel Fiber Glass Corp.

• Decision Date: 21 April 1976
• Docket Number: CLARK-SCHWEBEL,D,Nos. 588,663-665,s. 588
• Citation: 534 F.2d 1036
• Parties: 1976-1 Trade Cases 60,843 Carlyle MICHELMAN, Trustee of Textura, Ltd. in Bankruptcy Proceedings, Plaintiff-Appellee, v.FIBER GLASS CORPORATION, and Burlington Industries, Inc., Defendants-Appellants. ockets 75-7332, 75-7593, 75-7594 and 75-7598.
• Court: U.S. Court of Appeals — Second Circuit

Page 1036

534 F.2d 1036

1976-1 Trade Cases 60,843

Carlyle MICHELMAN, Trustee of Textura, Ltd. in Bankruptcy

Proceedings, Plaintiff-Appellee, v. CLARK-SCHWEBEL FIBER GLASS CORPORATION, and Burlington Industries, Inc., Defendants-Appellants.

Nos. 588, 663-665, Dockets 75-7332, 75-7593, 75-7594 and 75-7598.

United States Court of Appeals, Second Circuit.

Argued Jan. 15, 1976.

Decided April 21, 1976.

Haliburton Fales, 2d, New York City (Thomas McGanney, J. Michael Brown, White & Case, New York City, of counsel), for defendant-appellant Clark-Schwebel Fiber Glass Corp.

Donald L. Hardison, Washington, D. C. (Robert W. Devos, Jr., Bergson, Borkland, Margolis & Adler, Washington, D. C., of

counsel), for defendant-appellant Burlington Industries, Inc.

Howard Breindel, New York City (Wells Burgess, Robert Aronson, Regan, Goldfarb, Heller, Wetzler & Quinn, New York City, of counsel), for plaintiff-appellee.

Before LUMBARD, SMITH and MANSFIELD, Circuit Judges.

MANSFIELD, Circuit Judge:

Unraveling the complexities of an antitrust case usually places a heavy burden on all concerned, and perhaps the greatest on the finder of the facts. After a four-week trial before Charles H. Tenney, Judge, of this private antitrust suit for $9,750,000 treble damages under § 4 of the Clayton Act, 15 U.S.C. § 15, by the trustee in bankruptcy of Textura, Ltd. ("Textura"), the jury returned a verdict of $531,617 damages (before trebling) in the plaintiff's favor upon the claim that defendants-appellants, Clark-Schwebel Fiber Glass Corporation ("Clark-Schwebel") and Burlington Industries, Inc. ("Burlington") had violated § 1 of the Sherman Act, 15 U.S.C. § 1, by conspiring to cut off supplies and credit to Textura, thus forcing it out of business. Although the verdict was the product of four days of jury deliberation we are satisfied that, even when the evidence is viewed most favorably to the plaintiff, the verdict cannot be upheld. Accordingly, we must conclude that the defendants' motions for a directed verdict and judgment notwithstanding the verdict should have been granted.

The action was begun on December 9, 1966, in the Southern District of New York by Textura, Ltd. (for which its trustee in bankruptcy, Carlyle Michelman, was later substituted), its wholly-owned subsidiary Fenesta Fabrics, Inc. and Malcolm G. Powrie, majority shareholder and principal officer of Textura, against Clark-Schwebel, Burlington and J. P. Stevens & Co., Inc. ("Stevens"). Textura, a converter of decorative fiber glass fabrics into draperies, alleged that the defendants, who were suppliers of such fabrics, had conspired in violation of § 1 of the Sherman Act, 15 U.S.C. § 1, to restrain trade in the sale of such fabrics by using various means to drive Textura out of business, including the restriction of credit on sales to it, the withholding or delaying of deliveries to it, the shipment of defective merchandise to it and the inducement of its factor, L. F. Dommerich & Co. (which was named as a co-conspirator) to terminate financing of its receivables. In addition to this claim, the trial of which forms the basis of the present appeal, Textura also claimed that in refusing to extend credit to it the defendants had discriminated against it in violation of the Robinson-Patman Act, 15 U.S.C. §§ 13(a) and (e), that the defendants had unlawfully fixed prices of decorative and industrial fiber glass fabrics and that they had monopolized and attempted to monopolize trade and commerce in fiber glass industrial fabrics in violation of § 2 of the Sherman Act, 15 U.S.C. § 2.

Trial of the action was begun on October 15, 1974, before Judge Tenney and a jury. At the close of the plaintiff's case the court directed a verdict for the defendants on the decorative fabrics price-fixing claim and the plaintiff voluntarily dropped the Robinson-Patman Act and monopolization claims. Answering written questions, the jury found that there was a conspiracy between Clark-Schwebel and Burlington to drive Textura out of business but rendered a verdict on that claim in favor of Stevens, which it found not to be a member. It awarded $531,617 single damages to Textura against Clark-Schwebel and Burlington. In addition it rendered a total verdict of $99.56 single damages in favor of Textura against Burlington and Stevens on the industrial fiber glass fabric price-fixing claim. The claims of Powrie and Fenesta Fabrics Inc. were dismissed.

The district court denied defendants' motions made during trial for a directed verdict and their post-verdict motions for judgment notwithstanding the verdict, which were based upon the contention that the evidence was insufficient to support an inference of conspiracy to drive Textura out of business. Upon this appeal the two appellants advance this same contention as

the principal ground for reversal. They also seek reversal on the ground that Textura failed to prove that it suffered any damages as a result of the alleged conspiracy or that any such damages were caused by the defendants. In the alternative they seek a new trial because of errors claimed to have been committed in the conduct of the trial.

THE FACTS

A short outline of the undisputed facts with respect to the history of Textura and its dealings with the defendants is essential to our review and analysis of the record. Though Textura's predecessor was formed in 1954, ¹ the company operated on only a small scale until 1958, when Malcolm G. Powrie, Textura's president, decided to step up the company's operations. Textura's primary business consisted of purchasing bulk fiber glass fabrics from three suppliers Clark-Schwebel, Burlington and Stevens and converting the fabrics into finished draperies, which were then sold for use as window drapes.

Textura's method of operation represented an innovation in this area. Previously, owners of large office buildings had purchased only venetian blinds as window coverings; those tenants who desired drapes had to buy the drapes themselves on a piecemeal basis. Textura pioneered the bulk sale of fiber glass drapes directly to building owners for use in an entire building, thereby eliminating the need for venetian blinds. Generally, Textura attempted to obtain a specification for use of one of its exclusive fabric styles from the owner of a new building as it was being planned. If successful, Textura would then install the drapes at a later point, sometimes more than two years thereafter, when construction of the building had been completed.

Textura faced obstacles in developing this new method of selling fiber glass drapes. One difficulty arose from the fact that engineering data concerning the effect of venetian blinds on a building's heating and air conditioning requirements were well developed, while similar data concerning fiber glass drapes did not exist. Building owners were thus reluctant to buy drapes rather than venetian blinds because of the difficulty in computing how much heating and air conditioning they might then require. To cope with this problem, Textura engaged heating engineers to develop the relevant data for fiber glass drapes. This research, for which Textura received financial aid from Clark-Schwebel and others, took several years and culminated in the publication of a booklet in early 1965 to be used as a marketing tool in convincing reluctant building owners to buy drapes rather than venetian blinds.

Another difficulty arose from the long delay between Textura's making of a contract to install drapes in a building and the actual installation and receipt of payment by it. To avoid the necessity of financing large amounts of inventory during this period, Textura asked for and received special arrangements from each of the three companies, Burlington, Clark-Schwebel and Stevens, which supplied the bulk fiber glass fabrics used in its draperies. ² While none of these arrangements was ever reduced to writing, Textura was informally allowed to place bulk orders for fabrics with the supplier, which would then weave the fabrics, and hold them in its inventory until Textura called for them. The fabrics were generally held by the supplier for some months, and in some instances, for a year or more before Textura called for delivery and was billed for them by the supplier. Since Textura paid no interest for this investment in Over the years each supplier periodically would press Textura to "call out" fabrics sooner, and to speed up its payments for fabrics already delivered. However, their methods of trying to obtain prompter payment varied. In 1963, for instance, which was long prior to the alleged conspiracy, Raymond P. Nordheim, Vice President of Clark-Schwebel, wrote Powrie in June, October, and December, asking him to send payments on Textura's account. Burlington, on the other hand, asked Powrie and other stockholders of Textura on various occasions (1957, 1958, 1962 and 1964) to guarantee personally payment of the firm's debts. However, Powrie refused to give such a guarantee.

inventory, it thus gained a benefit not enjoyed by other customers. Furthermore, while the terms of the supplier's invoice required payment within 30 or 60 days, Textura rarely, if ever, met these terms; often it did not pay until 90 days or more after the invoice date, and on one occasion 140 days later. For the most part, Textura was apparently not charged interest on these overdue bills.

Until 1964, Textura had operated primarily in California, and had achieved some success in that market; the company showed net profits of $40,091 in 1962, and $49,285 in 1963. However, in 1964, when Textura expanded its sales operations and staff throughout the nation, the expenses involved in this expansion took their toll on the company which, according to the testimony of Powrie, its President, was always a thinly financed company. Textura experienced net losses of $113,788 in 1964 (characterized as "staggering" by Powrie), and $31,195 in 1965 (which made...