Morrison v. Murray Biscuit Co.

• Decision Date: 13 September 1985
• Docket Number: No. S 82-349.,S 82-349.
• Citation: 617 F. Supp. 800
• Parties: Robert A. MORRISON d/b/a Morrison Enterprises, Plaintiff, v. MURRAY BISCUIT COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Indiana

617 F. Supp. 800

Robert A. MORRISON d/b/a Morrison Enterprises, Plaintiff, v. MURRAY BISCUIT COMPANY, Defendant.

No. S 82-349.

United States District Court, N.D. Indiana, South Bend Division.

September 13, 1985.

COPYRIGHT MATERIAL OMITTED

David B. Weisman, South Bend, Ind., for plaintiff.

Cory Brundage, Debra S. Easterday, Indianapolis, Ind., Thomas F. Lewis, Jr., South Bend, Ind., for defendant.

MEMORANDUM AND ORDER

ALLEN SHARP, Chief Judge.

This is a civil action seeking damages for alleged violations of the Sherman Antitrust Act, 15 U.S.C. § 1. Plaintiff filed this case on July 16, 1982. Both parties conducted extensive discovery. A waiver of jury trial was received from both parties and the court ordered, on July 27, 1984, the case tried as a bench trial. On March 5, 1985, in open court, the parties (by counsel) stipulated to bifurcation of the issues of liability and damages. All depositions were ordered published and were admitted into evidence without objection. The parties also stipulated that the issue of liability would be tried to the court. Finally the parties stipulated that the evidence on the issue of liability would consist of the exhibits admitted in evidence and the depositions published and admitted in evidence. The plaintiff filed a brief on the issue of liability on May 11, 1985, this was followed by defendant's brief on the issue of liability filed on July 15, 1985, and plaintiff filed a reply brief on August 5, 1985. Both parties presented oral argument on the issue of liability to the court on August 8, 1985. The court now finds facts and states its conclusions of law thereon in accordance with Rule 52 of the Federal Rules of Civil Procedure.

I. FINDINGS OF FACT

Although there are no specific allegations of facts regarding a nexus to interstate commerce this court finds sufficient support in the record to reach an inference of a nexus to interstate commerce.

Plaintiff, Robert A. Morrison d/b/a Morrison Enterprises (Morrison), is a self-employed distributor of cookies and crackers. Morrison began serving the South Bend, Indiana area in that capacity approximately 26 years ago. Prior to that time Morrison was employed as a driver for other baked goods distributors in the South Bend area for approximately 6 years. These years of experience in the business provided Morrison with knowledge of the way in which the manufacturer/distributor/customer relationship functioned. In addition, Morrison gained knowledge of the limits under which the industry functioned. A pertinent example of this type of knowledge occurred when Morrison was employed by a bread distributor and discovered that before calling on a "chain" store¹ a distributor or his agent must contact the home office of the chain store and receive permission to call on the store. This limitation exists because often the home office purchases through a brokerage or distributor located in the same geographical center as the home office. In this case Morrison's knowledge of such limitations coupled with the oral instructions to him not to call on stores whose home office or warehouse was located outside the South Bend area should have been sufficient to avoid the alleged problems.

During Morrison's 26 years as a self-employed distributor, the area he served grew to include a fifty mile radius from South Bend, Indiana. The length of time Morrison worked in this field and the extent of the area he served clearly indicate that he was fully aware of which stores were affiliated with specific chains or warehouses.

Defendant, Murray Biscuit Company (Murray), is an unincorporated division of Beatrice Foods, Inc., and is authorized to do business in Indiana. Murray is a manufacturer of cookies and crackers. Murray utilizes both "brokers" and "broker-distributors" to sell and distribute its products.

A broker is distinguished from a broker-distributor in several ways. A broker does not take possession of the goods which he sells to his clients. The broker merely "services"² accounts and places orders directly to Murray for the client. In addition, the broker is not directly involved in the delivery of goods to the purchaser, nor does the broker collect payments on accounts. All delivery of orders placed by brokers was accomplished utilizing Murray's labor force and equipment. The price at which all brokers offer Murray's products is unilaterally determined by Murray. In general this determination is made by summing Murray's cost of manufacturing, labor, equipment, warehousing, and the commission which the broker was to receive from Murray. Brokers are special agents of Murray whose authority was limited to coordinating orders of Murray products for the broker's clients.

A broker-distributor, acting in a distributor capacity, purchases goods directly from Murray. The broker-distributor takes possession of the goods. Murray delivers the goods to the broker-distributor's warehouse. The broker-distributor in turn delivers the goods to the individual purchasers utilizing the broker-distributors' labor and equipment. The only significance of the term broker in the title broker-distribitor is that the price paid for goods delivered to his warehouse is the price at which all brokers could offer to any other client. The broker-distributor would receive a commission for goods sold, including any sales to his own warehouse. Murray did not control nor did they attempt to control the price at which a distributor could offer Murray products. In general the considerations a broker-distributor included when determining the price of goods were the cost to purchase the goods from Murray, and the broker-distributor's expenses for labor, equipment, and warehousing.

Morrison discovered that Murray products were available and decided to seek a distributorship. In his quest for such a distributorship Morrison called Mr. David Feldman, of Feldman Brokerage Company (Feldman), in Chicago, Illinois.³ When Morrison was connected with Feldman's office he was informed that Mr. Lester Riggs (Riggs) was present in the office. Riggs at that time was brokerage sales manager for Murray, and his responsibilities included regular visits to Feldman's Company. The brokerage sales manager also has authority to appoint or terminate brokers and broker-distributors. This authority was subject to approval or order of the vice-president in charge of sales. Feldman put Riggs on the telephone to talk with Morrison. Morrison inquired about an appointment as a Murray distributor for the South Bend, Indiana area. Riggs in turn made inquires regarding Morrison's experience and the area Morrison was presently serving. Morrison explained his experience and described the area he served as including a fifty mile radius around South Bend, Indiana. Feldman objected to Riggs appointing Morrison to serve the South Bend area because Feldman has representatives working in the area. Riggs, however, felt Morrison could expand Murray's market penetration. Riggs did not want to create intrabrand competition and instructed Morrison that he was appointing him as a distributor in the South Bend area but Morrison was not to call on stores which were already established Murray customers. Riggs told Morrison a letter confirming the appointment would be sent. The letter of appointment dated March 4, 1980 described the assigned territory as including a fifty mile radius around South Bend, Indiana,⁴ but did not include the restrictions concerning already established Murray customers.

Although the letter of appointment did not include the restrictions involving already established Murray customers, Morrison was not assigned an exclusive territory. Murray's market share was only 1 to 1.5 percent of the national market, in a market dominated by two major companies who comprised 40.66 percent of the market in 1983. To prevent intrabrand competition and stimulate interbrand competition, Riggs orally placed restrictions on the territory assigned to Morrison. These restrictions are pertinent in this case. Specifically the restriction on calling on stores affiliated with Certified warehouse located in Chicago, Illinois. The Certified warehouse was within Feldman's territory and had been his client for approximately 20 years. The Certified warehouse served several groups of stores in the greater Chicago and Northwest Indiana area. Morrison, by his admission, continuously called upon stores affiliated with the Certified warehouse.

Mr. Craig Williams (Williams), a Murray sales representative, was assigned responsibility for the territory assigned to Morrison. Williams verified the fact that Morrison was cognizant of the restrictions placed upon him. Morrison denies receiving any instruction concerning calls on Certified warehouse affiliates before March or June 1981. However, Williams and Morrison discussed the restrictions during Williams' first visit to work with Morrison. Williams visited this territory every 3 to 4 months. Consequently, Morrison was cognizant of the restrictions not later than June 1980.⁵

Morrison was given an "Outstanding Sales Achievement" award which suggests that Riggs' feeling about the potential market for Murray products in the South Bend area was correct. Williams pointed out that during that same period of time there were complaints from Morrison's customers. The complaints concerned Morrison's service of accounts. The customers voiced complaints involving overloading the complaintant's store with merchandise or unauthorized use of shelf space which had been specifically assigned to another manufacturer's products. Williams also described incidents which involved other brokers or distributors where Morrison had called upon stores who had been established clients of other Murray brokers or distributors. Although Williams believed those incidents had been resolved, Morrison stated at least one had never been resolved.

The controversey in this case focuses on a letter of...