Ohio-Sealy Mattress Mfg. Co. v. Kaplan

• Court: United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
• Citation: 545 F. Supp. 765
• Docket Number: No. 76 C 0810.,76 C 0810.
• Parties: OHIO-SEALY MATTRESS MANUFACTURING COMPANY, Sealy Mattress Company of Houston, Sealy Mattress Company of Puerto Rico, Inc., Sealy Mattress Company of Fort Worth, Sealy of The Northeast, and Sealy Mattress Company of Georgia, Plaintiffs, v. Morris A. KAPLAN, Sealy Mattress Company of Illinois, William H. Walzer, Sealy Connecticut, Inc., Sealy Greater New York, Inc., Waterbury Mattress Company, Morton H. Yulman, Sealy of Eastern New York, Inc., Sealy of Minnesota, Inc., Peter D. Brown, Sealy Mattress Company of Michigan, Inc., T. C. Englehardt, Jr., Fred G. Hodges Bedding Company (a/k/a Sealy Mattress Company of Reading, Pa.), Sealy of Des Moines, Inc., Walter Hertz, Sealy Mattress Company of New Jersey, Inc., Joseph V. Moffitt, Sealy of the Carolinas, Peerless Mattress Company, Lloyd B. Rosenfeld, Sealy Mattress Company of Oregon, Joseph R. Rudick, Maryland Bedding Company, James E. Thompson, Howard G. Haas, Sealy, Incorporated, Sealy Spring Corporation, Sealy Mattress Company of Colorado, Inc., Sealy Mattress Company of Northern California, Inc., Sealy Mattress Company of Southern California, Inc., Sealy Mattress Company of Arizona, Inc., Sealy Mattress Company of Florida, Inc., Sealy Mattress Company of Pittsburgh, Inc., and Sealy Mattress Company of Philadelphia, Inc., Defendants.
• Decision Date: 20 July 1982

545 F. Supp. 765

OHIO-SEALY MATTRESS MANUFACTURING COMPANY, Sealy Mattress Company of Houston, Sealy Mattress Company of Puerto Rico, Inc., Sealy Mattress Company of Fort Worth, Sealy of The Northeast, and Sealy Mattress Company of Georgia, Plaintiffs, v. Morris A. KAPLAN, Sealy Mattress Company of Illinois, William H. Walzer, Sealy Connecticut, Inc., Sealy Greater New York, Inc., Waterbury Mattress Company, Morton H. Yulman, Sealy of Eastern New York, Inc., Sealy of Minnesota, Inc., Peter D. Brown, Sealy Mattress Company of Michigan, Inc., T. C. Englehardt, Jr., Fred G. Hodges Bedding Company (a/k/a Sealy Mattress Company of Reading, Pa.), Sealy of Des Moines, Inc., Walter Hertz, Sealy Mattress Company of New Jersey, Inc., Joseph V. Moffitt, Sealy of the Carolinas, Peerless Mattress Company, Lloyd B. Rosenfeld, Sealy Mattress Company of Oregon, Joseph R. Rudick, Maryland Bedding Company, James E. Thompson, Howard G. Haas, Sealy, Incorporated, Sealy Spring Corporation, Sealy Mattress Company of Colorado, Inc., Sealy Mattress Company of Northern California, Inc., Sealy Mattress Company of Southern California, Inc., Sealy Mattress Company of Arizona, Inc., Sealy Mattress Company of Florida, Inc., Sealy Mattress Company of Pittsburgh, Inc., and Sealy Mattress Company of Philadelphia, Inc., Defendants.

No. 76 C 0810.

United States District Court, N. D. Illinois, E. D.

July 20, 1982.

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Frederic F. Brace, Jr., William H. Tobin, Sidley & Austin, Chicago, Ill., for plaintiffs.

Howard Koven, Phil C. Neal, Friedman & Koven, John H. Matheson, Hedlund, Hunter & Lynch, Max Wildman, Wildman, Harrold, Allen & Dixon, Henry S. Kaplan, Dressler, Goldsmith, Shore, Sutker & Milnamow, Robert H. Joyce, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, Ill., Fred B. Miller, Portland, Or., Louis B. Garippo, Thomas J. Campbell, Winston & Strawn, James E. Hastings, Chadwell, Kayser, Ruggles, McGee & Hastings, Stanley B. Block, Vedder, Price, Kaufman & Kammholz, Samuel Weisbard, McDermott, Will & Emery, Edward I. Rothschild, Rothschild, Barry & Myers, Richard K. Wray, Arnstein, Gluck, Weitzenfeld & Minow, Eli E. Fink, Fink, Coff & Stern, Albert D. Jenner, Jr., Jenner & Block, Michael W. Coffield, Gregory A. Friedman, Coffield, Ungaretti, Harris & Slavin, Chicago, Ill., for defendants.

MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

This case is one of several related antitrust actions that have been filed over the past decade by Ohio-Sealy Mattress Manufacturing Company ("Ohio-Sealy") and its subsidiaries (collectively referred to herein as "Plaintiffs") against Sealy, Inc. ("Sealy") and its various subsidiaries, licensees, officers and directors (collectively referred to herein as "Defendants") seeking declaratory, injunctive and monetary relief for alleged anticompetitive conduct in the mattress manufacturing industry. This matter is presently before the Court on defendant's motion for summary judgment with respect to the issues set forth in sections II.D.(a) and (b) and section IV of the Schedule of Issues previously filed in this case and the parties' cross-motions for summary judgment on Sealy's amended counterclaim.¹ For the reasons set forth below, defendants' motion for summary judgment will be denied with respect to the issue set forth in section II.D.(a), but granted with respect to the issues set forth in sections II.D.(b) and IV, and Sealy's motion for summary judgment on its counterclaim will be granted.

I. Defendant's Motion For Summary Judgment on the Issues Set Forth in Sections II.D.(a) and (b) and Section IV of the Schedule of Issues

The two principal issues toward which this motion is directed are: (1) whether plaintiffs are collaterally estopped from claiming in this action that they are entitled to equitable relief as to the exclusive manufacturing territories clause contained in the licensing agreement between Sealy and its licensees, assuming that plaintiffs can eventually show that the clause either applied alone or in combination with other alleged restraints violates the antitrust laws Schedule of Issues Section II.D.(a); and (2) whether plaintiffs have standing to seek relief in this action in connection with Sealy's acquisition of its Des Moines, Iowa, and Reading, Pennsylvania, licensees Schedule of Issues Sections II.D.(b) and IV. The Court referred this motion to Magistrate John Cooley for a report and recommendation on the merits. On June 4, 1981, Magistrate Cooley recommended that defendants' motion be denied in all respects and defendants have filed objections to the magistrate's report and recommendation pursuant to 28 U.S.C. § 636(b)(1).² After a careful and thorough review of the magistrate's report and recommendation, the memoranda filed by the parties both before the magistrate and in connection with the objections filed with the Court, and the prior opinions of this Court and those of Judge Parsons that bear on the issues at hand, we conclude that Ohio-Sealy is not barred from seeking equitable relief with respect to the exclusive manufacturing territories clause and that Ohio-Sealy lacks standing to challenge Sealy's acquisition of its Des Moines and Reading licensees.

A.

Section II.D.(a) of the Schedule of Issues provides in pertinent part:

Plaintiffs ... contend that equitable relief must include at the very minimum: (a) elimination of the exclusive manufacturing territories provisions and related provisions adopted immediately after the April, 1975 jury verdict in Ohio-Sealy Mattress Manufacturing Company v. Sealy, Inc., No. 71 C 1243 (N.D.Ill. Parsons, J.).

Defendants maintain that the issue of equitable relief with respect to the exclusive manufacturing territories clause within the temporal scope of the instant case was actually and fully litigated before Judge Parsons and necessarily decided by him in late 1979 in the context of the second equitable relief proceeding in Ohio-Sealy Mattress Manufacturing Company v. Sealy, Inc., No. 71 C 1243 ("1971 case"), on remand from the United States Court of Appeals for the Seventh Circuit. In Ohio-Sealy Mattress Manufacturing Company v. Sealy, Inc., 585 F.2d 821 (7th Cir. 1978), cert. denied, 440 U.S. 930, 99 S.Ct. 1267, 59 L.Ed.2d 486 (1979), the Seventh Circuit upheld a jury verdict in favor of plaintiffs and against defendants, but the Court of Appeals remanded the case for another hearing on equitable relief. On remand, Judge Parsons, who had presided at the trial of the 1971 case in 1974 and 1975 and the first hearing on equitable relief in 1976, declined to enjoin the exclusive manufacturing territories clause, though he did enjoin other provisions of the license agreement in order to prevent the conduct that the jury had found violative of the antitrust laws. Defendants argue that principles of collateral estoppel bar plaintiffs from raising the issue of equitable relief from the exclusive manufacturing territories clause in this case, which is temporarily limited to alleged unlawful conduct by defendants between April, 1975, and April, 1978,³ since defendants' alleged application of the clause alone and in conjunction with other alleged restraints during that time period was before Judge Parsons in the 1979 equitable relief proceeding in the 1971 case. Parklane Hosiery Company v. Shore, 439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979); Restatement (Second) of Judgments § 68 (Tentative Draft No. 4, April 15, 1977).

In an earlier opinion in this case dated February 4, 1981, this Court indicated after reviewing Judge Parsons' opinion on equitable relief in the 1971 case, that, in its view, Judge Parsons had confined his inquiry to whether defendants' pre-verdict conduct at issue in that case necessitated the equitable relief sought by plaintiffs in that case. Ohio-Sealy Mattress Manufacturing Company v. Kaplan, 90 F.R.D. 35, 38 (N.D.Ill.1981). Although we had held previously that defendants were precluded from seeking post-verdict damages in this case for pre-verdict conduct that was necessarily part of the 1971 case, we reiterated that our earlier decision:

does not preclude plaintiffs from seeking equitable relief in this case based on post-verdict conduct; nor does Judge Parsons' recent ruling on equitable relief bar such a claim, since his ruling was based on the pre-verdict conduct at issue in that case.

Id. Defendants suggest, however, that our statement with respect to the scope of the equitable relief proceeding conducted by Judge Parsons fails to take account of the issues actually litigated and necessarily decided by Judge Parsons in his written opinion at the conclusion of that proceeding. Thus, at defendants' urging, we have again reviewed Judge Parsons' opinion on equitable relief, but still cannot conclude that the issue of equitable relief from the exclusive manufacturing territories provision with respect to defendants' post-verdict conduct involved in this case was actually litigated or necessarily decided by Judge Parsons in such a way as to invoke the preclusive bar of collateral estoppel in this case.⁴

Although there are certain statements in Judge Parsons' opinion, as amended, that, taken out of context, could be construed as indicating that he considered both pre- and post-verdict conduct and the appropriate relief therefrom in fashioning the equitable relief with respect to the exclusive manufacturing territories clause in the 1971 case, the general tenor of the opinion and Judge Parsons' own statements as to what he was and was not deciding in that case compel a more narrow interpretation of his opinion. Judge Parsons was aware that Ohio-Sealy had filed several lawsuits against Sealy and others after the 1975 jury verdict challenging various actions taken by defendants subsequent to the jury verdict, yet he attempted to confine his inquiry to the conduct at issue in the 1971 case and the jury's findings in that regard. He stated that although h...