Paterson Parchment Paper Co. v. Story Parchment Co.

• Citation: 37 F.2d 537
• Decision Date: 23 January 1930
• Docket Number: No. 2372.,2372.
• Parties: PATERSON PARCHMENT PAPER CO. et al. v. STORY PARCHMENT CO.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

37 F.2d 537 (1930)

PATERSON PARCHMENT PAPER CO. et al. v. STORY PARCHMENT CO.

No. 2372.

Circuit Court of Appeals, First Circuit.

January 23, 1930.

Edward F. McClennen, of Boston, Mass. (Joseph M. Dohan, of Philadelphia, Pa., and Charles F. Dunbar, of Boston, Mass., on the brief), for appellants.

Sherman L. Whipple, of Boston, Mass. (Edward O. Proctor and Edward C. Park, both of Boston, Mass., on the brief), for appellee.

Before BINGHAM, ANDERSON, and WILSON, Circuit Judges.

WILSON, Circuit Judge.

An action under section 7 of the Sherman Anti-Trust Act and section 4 of the Clayton Act (15 USCA § 15) to recover damages resulting from an alleged violation by the defendants of section 2 of the Sherman Anti-Trust Act (15 USCA § 2), prohibiting the monopolizing of, or a combination or conspiracy to monopolize, any part of the trade or commerce between the several states.

At the close of the case, the defendants' counsel asked that the court instruct the jury to bring in a verdict for the defendants upon several grounds, among which are the following:

"The evidence is insufficient to establish that the plaintiff has suffered damage by reason of the acts of the defendants and West Carrollton Parchment Company in pursuance of the combination and conspiracy."

"The evidence is insufficient to establish that the plaintiff has lost profits because of any acts of the defendants and West Carrollton Parchment Company in combination and conspiracy."

"The plaintiff is not entitled to a verdict unless it has established that it has been damaged by the combination, contract or conspiracy."

"The plaintiff has not established that the reductions in prices by the defendants were any more injurious to the plaintiff by reason of any contract, combination or conspiracy than they would have been without such."

"The evidence does not warrant a finding that the plaintiff would have sold any more goods under other circumstances than it did sell."

"The evidence does not warrant a finding that the plaintiff would have sold at higher prices under any other circumstances than those at which it did sell."

"The plaintiff is not entitled to a verdict unless it has been shown that damages in some amounts susceptible of expression in figures, resulted from the defendants' acts and these damages must be proved by facts from which their existence is logically and legally inferable and they cannot be supplied by conjecture."

The record disclosed that prior to 1927 the two defendants, the Paterson Parchment Paper Company of Passaic, N. J., and the Kalamazoo Vegetable Parchment Company of Kalamazoo, Mich., both of which companies transact business in Massachusetts, and are hereinafter referred to as the defendants, together with the West Carrollton Parchment Company of West Carrollton, Ohio, which, for lack of jurisdiction, is not joined in this action, and which will hereinafter be referred to as the Carrollton Company, were the only producers in this country of what is known to the trade as parchment paper, which is used as a protective wrapper for meats, butter, and other foodstuffs.

It also appears from the record that these three companies for many years prior to 1927 maintained an association for the discussion of questions affecting their mutual interests, holding meetings every two months, at which representatives of such company with their counsel attended and discussed the condition of the trade.

There is no question but that, prior to the organization of the plaintiff company, the three companies above named had maintained a uniform price for their product, and, while there was some parchment paper imported, enjoyed a practical monopoly of the trade in this country.

All this the plaintiff or those who organized it knew when it entered the field. It does not appear that the condition of the trade and the demand for the product held out any special inducement to a competitor by reason of a prospective increase in the demand, at least over the capacity of the three old companies to supply.

The only hope the plaintiff could have had of acquiring any considerable share of the trade was by either producing a superior quality of paper, by more efficient salesmanship, or by reducing prices over those charged by the three companies already in the field.

While the plaintiff claims it did produce a superior grade of paper, and at a less cost, through improved machinery, its first effort to obtain trade was to deal direct with the large packers and jobbers and offer a 5 per cent. discount on the prices then offered by the defendants and the Carrollton Company. Such a policy immediately resulted in a price-cutting war between the three old companies and the plaintiff. The defendants contend that to retain their trade they were forced to meet the prices of the plaintiff; that they had a right to do this to protect themselves; that they did not so act through a mutual understanding or agreement; and that a reduction of prices does not result in a restraint of trade, but, on the contrary, encourages it.

The plaintiff concedes, as we understand it, that, if either or both of the defendants, independent of each other, had reduced their prices in order to retain their own trade as against the new competitor, it would have had no ground for action.

What it complains of is that the three old companies, by concerted action and mutual understanding, not only met its prices, but in some instances reduced their prices below those of the plaintiff, in order to prevent the plaintiff from acquiring any part of the trade in parchment paper and for the purpose of maintaining the monopoly which they already had, and which, if not an absolute monopoly, was sufficiently complete, so that, if they conspired together to maintain it, it constituted a violation of section 2 of the Sherman Anti-Trust Act (15 USCA § 2). Buckeye Powder Co. v. E. I. Dupont de Nemours Powder Co. (C. C. A.) 223 F. 881, 888, 889, affirmed in 248 U. S. 55, 64, 39 S. Ct. 38, 63 L. Ed. 123; United States v. E. C. Knight Co., 156 U. S. 16, 15 S. Ct. 249, 39 L. Ed. 325; Addyston Pipe & Steel Co. v. United States, 175 U. S. 211, 221, 237, 20 S. Ct. 96, 44 L. Ed. 136; Standard Oil Co. v. United States, 221 U. S. 1, 61, 31 S. Ct. 502, 55 L. Ed. 619, 34 L. R. A. (N. S.) 834, Ann. Cas. 1912D, 734.

In other words, the plaintiff does not ground its action on a conspiracy to restrain trade under section 1 of the Sherman Anti-Trust Act (15 USCA § 1), though the indirect effect of a monopoly is to restrain trade, but on a conspiracy to maintain a monopoly under section 2 (15 USCA § 2).

On this issue alone, we think there was no error in the refusal of the court to instruct the jury to bring in a verdict for the defendants. Without expressing any opinion as to the soundness of the jury's conclusion, there was sufficient evidence to go to the jury on the issue of a concerted action by the three old companies to fix their prices so as to prevent the plaintiff from acquiring any part of their trade. Patterson v. United States (C. C. A.) 222 F. 599, 648, 649; Hitchman Coal & Coke Co. v. Mitchell, 245 U. S. 229, 249, 38 S. Ct. 65, 62 L. Ed. 260, L. R. A. 1918C, 497, Ann. Cas. 1918B, 461.

But, assuming that the jury was warranted in finding for the plaintiff on this issue, it does not necessarily follow that the plaintiff suffered injury. It must be proven. We think the weakness of the plaintiff's case, and wherein it failed on this branch of the case to establish the burden the law imposed upon it, is in a lack of proof that, by reason of the alleged unlawful acts of the defendants, it has suffered damage through what is termed "loss of profits," which can be measured and expressed in figures that are not based on speculation and conjecture, or that the damages resulting from the alleged depreciation of its plant was in any measurable degree due to any unlawful acts of the defendants. Keogh v. C. & N. W. Ry. Co., 260 U. S. 156, 165, 43 S. Ct. 47, 67 L. Ed. 183; Jack v. Armour Co. (C. C. A.) 291 F. 741, 745. Upon the entire evidence, the jury should have been instructed to bring in a verdict for the defendants.

The use of the phrase "loss of profits" as the measure of one element of the plaintiff's damage is not a happy one. The plaintiff's declaration alleges, and its counsel in their brief contend, that the measure of damage on this phase of the case is not the loss of actual profits in its business, which it would have made if the defendants had not unlawfully combined to reduce prices, but the difference between the prices it was compelled to sell its products through the alleged unlawful combination, and the prices current in November, 1927, if fair and reasonable. It contends, as the plaintiff did in the case of Straus et al. v. Victor Talking Machine Co. (C. C. A.) 297 F. 791, that it is not obliged to sue for loss of profits in its business which are not always susceptible of proof. Loss of profits, to form the basis of damages, must be made reasonably certain by proof, or be inferable from proven facts that can form the basis for a rational estimate of their amount and not depend upon uncertainties and mere speculation or conjecture. Central Coal & Coke Co. v. Hartman (C. C. A.) 111 F. 96; McCornick v. U. S. Mining Co. (C. C. A.) 185 F. 748, 751; American Sea Green Slate Co. v. O'Halloran (C. C. A.) 229 F. 77, 80; Keogh v. C. & N. W. Ry. Co., supra. Obviously in the case at bar there could be no evidence on which to base an estimate of any actual loss of profits during the period the plaintiff operated, based on previous experience, since the plaintiff never operated under what it claims are fair and reasonable prices for a sufficient length of time to furnish a standard, as the plaintiff had in Eastman Co. v. Southern Photo Co., 273 U. S. 359, 378, 379, 47 S. Ct. 400, 71 L. Ed. 684, and the jury were so instructed.

The plaintiff contends, however, that it is entitled, under the...