Oklahoma Retail Grocers Ass'n v. Wal-Mart Stores, Inc.
| Decision Date | 21 August 1979 |
| Docket Number | WAL-MART,No. 78-1076,78-1076 |
| Parties | 1979-2 Trade Cases 62,803 CA 79-3158 OKLAHOMA RETAIL GROCERS ASSOCIATION, an Oklahoma Corporation, Plaintiff-Appellant, v.STORES, INCORPORATED, a Delaware Corporation, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Grover L. Miskovsky, of Miskovsky, Sullivan & Miskovsky, Oklahoma City, Okl. (George Miskovsky, Sr., Carroll E. Gregg and John Paul Johnson, of Miskovsky, Sullivan & Miskovsky, Oklahoma City, Okl., on the brief), for plaintiff-appellant.
Charles W. Shipley, Tulsa, Okl. (James L. Kincaid and S. Robson Walton, Tulsa, Okl., on the brief), for defendant-appellee.
Before McWILLIAMS, DOYLE and McKAY, Circuit Judges.
The principal question in this appeal is whether the trial court erred in ruling that the plaintiff-appellant, the Oklahoma Retail Grocers Association, was barred from maintaining the suit by the so-called clean hands doctrine, the relief sought having been injunctive in nature. The complaint or petition as it is called in the state court in Oklahoma was originally filed July 16, 1976, in the District Court in the State and County of Oklahoma.
Oklahoma Retail Grocers Association is an organized trade association and also a corporation under the laws of Oklahoma and is licensed by the State of Oklahoma as a retail grocery association. The action was brought by it on behalf of its 1,237 members, all of which were engaged in the retail grocery business in Oklahoma and which members did business in a number of counties. The defendant was alleged to have been a foreign corporation with its principal business in Bentonville, Arkansas. It is allegedly in the same business as the members of the plaintiff corporation. The suit was brought under the Oklahoma Unfair Sales Act, Title 15, Sections 598.1 to 598.11, inclusive, Okl.Stat.Annot. The action sought a temporary and permanent injunction in accordance with the terms of the mentioned statute. The complaint alleged that the plaintiff and the members of the plaintiff Association were injured by the defendant as a result of its past violations and threatened future violations of the Oklahoma Unfair Sales Act. Specifically, defendant was alleged to have advertised, offered for sale and sold at retail items of merchandise at prices at less than cost to the retailer as defined by the Oklahoma Unfair Sales Act. It referred to an exhibit attached which included a number of items which were sold below cost. This was said to have been carried on for the intent and purpose of diverting trade from competitors or otherwise injuring competition or impairing and preventing fair competition. The particular complaint was that the items advertised by the defendant were sold below cost and that this directly injured the plaintiff Association and its members.
The temporary restraining order was issued by the State District Court following which the cause was removed by the defendant to the United States District Court for the Eastern District of Oklahoma. The petition for removal set forth the diversity of citizenship of the plaintiff and defendant corporation and stated also that the matter in controversy exceeded the sum or value of $10,000 exclusive of interest or costs. The plaintiff sought an order of remand to the District Court of Oklahoma County, State of Oklahoma. This was denied. Extensive discovery was had, and finally on September 19, 1977, defendant filed a motion for summary judgment pursuant to Rule 56, F.R.Civ.P. The emphasis in the motion was given to the alleged fact that various members of the Association had violated the provisions of the Act since its inception; that there was no substantial controversy as to any material fact including the equitable defense of clean hands. The cause was determined on that ground.
Summary judgment was granted by Judge Thompson based upon responses of plaintiff to defendant's requests for admissions as to numerous advertisements by the members of plaintiff Association revealing sales below cost on their part, the very activity that was the basis for the complaint herein. The court's order recited that at the pretrial conference a stipulation between the parties contained the agreement that the plaintiff Association would not move the court or any other court to grant injunctive relief against the defendant while this action was pending if the defendant would order the managers of its stores within the State of Oklahoma not to advertise its merchandise at below cost. Also stipulated was that offering to sell, or sale of merchandise at less than cost would destroy or lessen competition. The court said that the sole basis set forth in the motion for summary judgment was the issue of unclean hands. With respect to this the court said:
The plaintiff has admitted that certain of its members have violated the Act. In answers to requests for admissions filed by the defendant the plaintiff has admitted 35 separate instances of below cost advertising in 12 different towns in Oklahoma by members of the plaintiff Association during the pendency of this action.
The defendant also has admitted to below cost advertising prior to the filing of this action. However, the defendant denies a violation of the Act claiming that to violate the Act requires the showing of an intent to injure competition which it claims is not established by the mere showing of the advertisement and sale of an item below cost by a retailer. * * * The plaintiff asserts that because it is a corporation the actions of its members or shareholders are not attributable to it for purposes of the application of the clean hands doctrine.
The court concluded that summary judgment was appropriate; that it would be an injustice to allow the plaintiff, whose members are admittedly doing what it seeks to enjoin the defendant from doing, to continue to prosecute this action. The court also concluded that since there was no issue of material fact in connection with the dispositive issue, summary judgment was appropriate.
The remedy here, that is an injunction against price-cutting, was conceived of during the great Depression so as to stabilize the economy and provide some protection of small business, whereby it could not be ruled by cutthroat competition. At present price-cutting is not regarded as a social evil. The fact, however, that the remedy is old-fashioned is no basis for not enforcing it. If, indeed, the law is no longer useful, it should be repealed. In our view the trial court was correct in taking the stand that the Association is not entitled to injunctive relief on behalf of its members when its members are engaged in the very same activity that the defendant is guilty of and for which injunctive relief is sought. The argument of the defendant and the decision of the court was that plaintiff was in a poor position to select the defendant and prosecute it while at the time allowing its members to carry on the same activities. A court of equity looks with disfavor upon such activity. It will, in the proper case, withhold aid in accordance with the clean hands doctrine.
It is important to note that the plaintiff-appellant corporation exists only through its member businesses. The petition in this case alleges that "the plaintiff prosecutes this cause as the real party in interest for and on behalf of 1,237 members of said Association all of whom and at all times material hereto reside in the State of Oklahoma. * * * " Thus, the beneficiaries of this action are the numerous members of the Association. The effort is to prevent the defendant-appellee from engaging in competition through price cutting with the members of the trade association. However, the result of giving effect to a corporate entity here would be tantamount to saying that this representative of the violators is Simon Pure merely because of the corporate character. If the corporation had Fletcher Cyclopedia Corporations, Vol. 1, § 41, explains the circumstances under which there will be a disregard of the corporate entity. The author reports...
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Oklahoma. Practice Text
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