Perryton Wholesale, Inc. v. Pioneer Distributing Co. of Kan., No. 7975.
| Court | United States Courts of Appeals. United States Court of Appeals (10th Circuit) |
| Writing for the Court | PHILLIPS, LEWIS and BREITENSTEIN, Circuit |
| Citation | 353 F.2d 618 |
| Decision Date | 09 November 1965 |
| Docket Number | No. 7975. |
| Parties | PERRYTON WHOLESALE, INC., a corporation, Appellant, v. PIONEER DISTRIBUTING COMPANY OF KANSAS, Inc., a corporation, Appellee. |
353 F.2d 618 (1965)
PERRYTON WHOLESALE, INC., a corporation, Appellant,
v.
PIONEER DISTRIBUTING COMPANY OF KANSAS, Inc., a corporation, Appellee.
No. 7975.
United States Court of Appeals Tenth Circuit.
November 9, 1965.
Malcolm Miller and Gerald Sawatzky, Wichita, Kan., (George B. Powers, Carl T. Smith, John F. Eberhardt, Stuart R. Carter, Robert C. Foulston, Robert N. Partridge, Robert M. Siefkin, Richard C. Harris, Donald L. Cordes, Robert L. Howard, Charles J. Woodin, Mikel L. Stout, Ronald K. Badger, Benjamin C. Langel, Wichita, Kan., and Phillip S. Frick, Wichita, Kan., on the brief), for appellee.
Before PHILLIPS, LEWIS and BREITENSTEIN, Circuit Judges.
BREITENSTEIN, Circuit Judge.
The trial court awarded injunctive relief and damages to appellee-plaintiff Pioneer Distributing Company of Kansas, Inc., (Pioneer) under the Sherman and Clayton antitrust acts.1 Appellant-defendant Perryton Wholesale, Inc., (Perryton) has appealed.
Pioneer and Perryton are each in the business known in the trade as that of a rack jobber. A rack jobber is one who sells non-food items, such as cosmetics, beauty aids, drugs, phonograph records, toys, soft goods, household utensils, and like products, to grocery stores and other retail merchandisers. Rack jobbers are distinguished from other merchandisers by their method of operation. A rack jobber furnishes a retailer with the racks on which the merchandise is displayed, visits the outlet frequently to stock the racks, accepts merchandise which has not been sold in a reasonable time for credit, and possesses some skill or knowledge in the placing of items on the racks at favorable times in given areas. The route salesmen for a rack jobber solicit new accounts and service existing accounts by taking orders once or twice a week. The orders are sent to a central warehouse from which deliveries are made to the retailers. The training of route salesmen is important to the success of a rack jobber.
Over a period of years Pioneer had built up its business in an area including parts of several states and had become the predominant rack jobber in Western Kansas and Southeastern Colorado. Perryton entered the rack jobbing field in 1960. Before February, 1961, Perryton did not operate in the same area as did Pioneer except for Liberal, Kansas.
In May, 1960, Austin, a long-time and trusted employee of Pioneer who had full knowledge of Pioneer's operations, routes and customers, left Pioneer to become sales manager for Perryton. Before and after leaving Pioneer Austin tried to persuade other Pioneer employees to leave that company and to come over to Perryton bringing with them as much of the Pioneer business as was possible. Lehr, a supervisor for Pioneer in Western Kansas and Colorado with 10 salesmen under him, was a close friend of Austin, and before Austin's departure from Pioneer the two discussed the shift from Pioneer to Perryton. In February, 1961, Hink, an experienced route salesman under Lehr, quit Pioneer on a Saturday and began work for Perryton on the following Monday, calling on the same customers in the same territory which he had serviced for Pioneer. The activities of Hink resulted in the loss of many accounts by Pioneer. Lehr knew, but did not inform Pioneer, of the activities of Hink. Two other salesmen, Ryan and Davidson, left Pioneer for Perryton. Before leaving Pioneer Davidson told his customers that he was terminating and asked them to change their accounts to his new employer. As a salesman for Perryton, Davidson serviced his former Pioneer accounts.
On June 3, 1961, Lehr told Pioneer he was taking a two-week vacation. During that period he visited one of the important Pioneer accounts with the express purpose of switching it to Perryton. He did not return to Pioneer but
Pioneer's claim for injunctive relief was heard by Judge Hill who made findings of fact and conclusions of law and entered a permanent injunction against Perryton on the ground that Perryton was guilty of a conspiracy and combination in restraint of trade in violation of 15 U.S.C. § 1 and, accordingly, Pioneer was entitled to injunctive relief under 15 U.S.C. § 26. Judge Brown heard the claim for damages. He adopted the findings and conclusions of Judge Hill, and gave judgment for Pioneer in the amount of $97,826. This appeal is from both the judgment granting injunctive relief and the judgment awarding damages.
Perryton attacks the sufficiency of the evidence. It first says that no wrong occurs when one solicits his competitor's at-will employees to come and work for him. This brings up the ancillary question of the contracts which Pioneer had with its employees. These contained restrictive covenants whereby the employees agreed not to enter the rack jobbing business for a period of one year after termination of employment in competition with Pioneer in named states. Contracts of this type have the approval of the Kansas courts.2 Perryton's reliance on McCluer v. Super Maid Cook-Ware Corp., 10 Cir., 62 F.2d 426, a case arising in Kansas, is misplaced. That case is distinguishable on the facts, does not cite any Kansas cases, and was decided before Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, which requires federal courts to apply state law in such circumstances.
We fail to see the pertinence of the argument based on the salesmen's contracts. These contracts were not for a definite term. The salesmen were free to terminate, subject to the restrictive provisions. We are not concerned with breach of contract. The questions are whether Perryton conspired to solicit and use Pioneer's employees to acquire for Perryton the business of Pioneer in Western Kansas and Colorado and whether such conspiracy, if established, violated the federal antitrust laws.
In Hitchman Coal & Coke Co. v. Mitchell, 245 U.S. 229, 259, 38 S.Ct. 65, 75, 62 L.Ed. 260, the Supreme Court said in substance that to persuade a "rival's clerks to desert him under circumstances rendering it difficult or embarrassing for him to fill their places" was unfair competition. By its conspiratorial conduct Perryton successfully induced several trained and trusted employees of Pioneer to change sides in the competitive battle and to bring with them Pioneer's customers, routes, and business methods. As a result Pioneer lost business and was subjected to the troublesome burden of both shifting and training personnel to take the places of the deserters in an effort to maintain a competitive position. The record sustains the trial court's findings of conspiracy. The purpose and methods of the conspiracy exceed the bounds of fair competition.
Perryton urges that unfair competition does not suffice to establish a violation of § 1 of the Sherman Act. A breach of the conventional standards of fairness and morality is not enough standing alone. The statute applies when there is a conspiracy to impose an unreasonable restraint on interstate trade and commerce. This occurs when a conspiracy exists to suppress competition in interstate trade through the elimination of a competitor by unfair means. Perryton relies on Ace Beer Distributors, Inc. v. Kohn, Inc., 6 Cir., 318 F.2d
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...C. Albert Sauter v. Richard S. Sauter Co., 368 F.Supp. 501 (E.D.Pa.1973). See also Perryton Wholesale Inc. v. Pioneer Distributor Co., 353 F.2d 618 (10th Cir. 1965) cert. denied 383 U.S. 945, 86 S.Ct. 421 F. Supp. 289 1202, 16 L.Ed.2d 208 (1966).31 However, in a recent opinion from the Firs......
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Franklin Music Co. v. American Broadcasting Companies, Inc., Nos. 78-2300
...a showing of the purpose or intent of the activity. In one of the cases, Perryton Wholesale Inc. v. Pioneer Distributing Co. of Kansas, 353 F.2d 618, 622 (10th Cir. 1965), cert. denied, 383 U.S. 945, 86 S.Ct. 1202, 16 L.Ed.2d 208 (1966), the court found both an effect on interstate commerce......
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...552, 52 S.Ct. 503, 76 L.Ed. 1288 (1932), and two subsequent cases from other courts, Perryton Wholesale, Inc. v. Pioneer Distributing Co., 353 F.2d 618 (10th Cir. 1965), cert. denied, 383 U.S. 945, 86 S.Ct. 1202, 16 L.Ed.2d 208 (1966) and C. Albert Sauter Co. v. Richard S. Sauter Co., 368 F......
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Franklin Music Co. v. American Broadcasting Companies, Inc., Nos. 78-2300
...a showing of the purpose or intent of the activity. In one of the cases, Perryton Wholesale Inc. v. Pioneer Distributing Co. of Kansas, 353 F.2d 618, 622 (10th Cir. 1965), cert. denied, 383 U.S. 945, 86 S.Ct. 1202, 16 L.Ed.2d 208 (1966), the court found both an effect on interstate commerce......
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A. H. Cox & Co. v. Star Machinery Co., No. 78-3574
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Grams v. Boss, No. 78-567
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