Pierce v. Ramsey Winch Co., 83-1804

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Citation753 F.2d 416
Docket NumberNo. 83-1804,83-1804
Parties1985-1 Trade Cases 66,429, 1 Fed.R.Serv.3d 356, 20 Fed. R. Evid. Serv. 494 George PIERCE and Jeff Pierce, Individually and d/b/a Pierce Sales, a Partnership, Plaintiffs-Appellees, v. RAMSEY WINCH COMPANY, A Foreign Corp., Defendant-Appellant.
Decision Date20 February 1985

Tom L. Armstrong, Joe M. Fears, Tulsa, Okl., for defendant-appellant.

Gary Dobbs, Jack Banner, Wichita Falls, Tex., for plaintiffs-appellees.

Appeal from the United States District Court for the Northern District of Texas.

Before GARZA, RANDALL and TATE, Circuit Judges.

RANDALL, Circuit Judge:

A jury determined that the defendant-appellant, a winch manufacturer, violated section one of the Sherman Act when, pursuant to a resale price maintenance conspiracy, it terminated a price-cutting distributor. This appeal from the district court's judgment against the manufacturer for treble damages presents questions with respect to (1) the scope of the trial court's duty to instruct the jury on defensive theories raised by the evidence and (2) the quantum of proof required to survive a motion for directed verdict on the issues of antitrust injury and damages. For the reasons set forth below, we affirm.


Ramsey Winch Company (Ramsey) manufactures various types of winches and winch accessories at its plant in Tulsa, Oklahoma. Ramsey does not, however, sell its products directly to winch-consumers. Rather, the company sells its winches to independent distributors who, in turn, sell them to the public.

Ramsey has established a suggested retail price for each of its winch models. Distributors purchase Ramsey winches at a discount, depending on volume, of between forty percent and forty-five percent of the suggested retail price. 1 According to Ramsey, distributors are then free to sell winches to the public at whatever price they choose. Ramsey does, however, require that its distributors maintain certain inventory levels and that they perform service and warranty work, without reimbursement from Ramsey, on any Ramsey product brought to them for service. 2

In September of 1977, Pierce Sales, a partnership owned by George Pierce and his son, Jeff Pierce, applied to Ramsey for authorization to operate a distributorship in Henrietta, Texas. Although a written distributor's agreement was not executed until July 7, 1978, Ramsey began filling Pierce Sales winch orders shortly after the application was received. Pierce Sales, in turn, began to aggressively market Ramsey winches. The company advertised Ramsey products extensively in local and national publications and conducted a direct mail campaign designed to solicit orders from dealers in areas not well-covered by existing distributors. At first, Pierce Sales directed its efforts toward the salvage market. Later, at Ramsey's urging, Pierce Sales sought to expand into the four-wheel drive market. Throughout, the thrust of its marketing plan was price competition. Pierce Sales reduced its own costs by (1) making volume purchases of more than fifty winches per order to receive the maximum Ramsey discount from the suggested retail price; (2) paying cash to receive an additional Ramsey discount for cash orders; and (3) picking up its winches at the Ramsey plant, rather than having them shipped to Henrietta, to reduce transportation costs. As a result of these cost-saving measures, Pierce Sales was able to offer Ramsey products at very low prices, a fact that was displayed prominently in its advertisements and mailings. Pierce Sales' marketing plan was very successful; through November of 1978, sales of Ramsey winches, both direct sales at its store in Henrietta and mail order sales to buyers throughout the country, steadily increased. By May, 1978, Pierce Sales, with Ramsey's approval, billed itself as "Texas' largest discount distributor" of Ramsey winches.

It is undisputed that many Ramsey distributors complained to Ramsey that Pierce Sales' prices were too low. Ramsey claims that it also received complaints that Pierce Sales was not providing adequate service and warranty work to Ramsey consumers. The evidence is conflicting on what happened next. Ramsey claims that it took no action based on the price complaints that it received from other distributors about Pierce Sales. Ramsey further claims that, with respect to price, its only concern was that Pierce Sales generate sufficient profit to perform adequately its service obligations. Pierce Sales claims, on the other hand, that Ramsey, acting in concert with its other distributors, attempted to force Pierce Sales to conform to a resale price maintenance policy. At one point, Pierce Sales claims, Ramsey threatened legal action if Pierce Sales persisted in selling winches at low prices. In May of 1978, Ramsey officials met with George and Jeff Pierce in Henrietta, Texas. Although the details are disputed, Pierce Sales claims that the purpose of the meeting was to force Pierce Sales to raise its prices. Pierce Sales points to an inter-office memorandum, prepared by Ramsey officials, which describes the results of the meeting: "After a 5 hour discussion, [the Pierces] promised to raise prices and would have all adds [sic] approved by Ramsey Winch Co. in the future." Plaintiff's Ex. 9. Ramsey, on the other hand, argues that the purpose of the agreement reached at the meeting was not to fix prices, but to ensure that Pierce Sales made enough profit on winch sales to meet its service and warranty obligations. After the meeting, Pierce Sales raised its prices slightly and took steps to remove mention of its low prices from its advertisements. It also submitted all future ads to Ramsey for approval.

Pierce Sales continued to distribute Ramsey products until late in 1978. At that time, Pierce Sales obtained a list of authorized Ramsey distributors and mailed to each of them a list of Pierce Sales' current inventory of Ramsey products and the price at which that inventory could be purchased. Because Pierce Sales made volume purchases and received the largest available discount from Ramsey's suggested retail price, Pierce Sales was able to offer prices in the mailing that were lower than the prices paid by many small distributors to purchase winches directly from Ramsey. Shortly after Pierce Sales distributed the inventory and price list, Ramsey summoned George and Jeff Pierce to Tulsa for a meeting with company vice-president Joe Henry. The next day, Ramsey terminated Pierce Sales' right to distribute Ramsey winches.

Ramsey claims that it terminated Pierce Sales because (1) Pierce Sales failed to perform adequately its warranty and service obligations and (2) Pierce Sales, through the inventory and price-list mailing, directly solicited orders from other Ramsey distributors which, according to Ramsey, would, if successful, disrupt its entire distribution system. 3 Pierce Sales claims, on the other hand, that it mailed its inventory and price-list to other distributors, with Ramsey's permission, simply to inform them of the winch models that Pierce Sales had in stock. Pierce Sales claims that, around this time, the Ramsey factory was experiencing delays in supplying certain models. The professed goal of the mailing was not to take over Ramsey's distribution system; rather, Pierce Sales simply wanted to inform other distributors of alternative sources of supply for Ramsey products that were not immediately available from the factory. If the others reciprocated, all distributors could speed back-ordered winches to consumers as quickly as possible. Moreover, Pierce Sales claims that Ramsey terminated its distributorship because Pierce Sales' discount prices threatened Ramsey's resale price maintenance scheme, which Ramsey implemented and enforced through concerted action with its other distributors. Pierce Sales responded to termination in two ways: (1) it began to sell winches made by other manufacturers and to increase its marketing efforts with respect to products other than winches and (2) it filed this action for treble damages alleging that Ramsey terminated its distributorship in violation of section one of the Sherman Act. 4

Pierce Sales' complaint alleges a vertical price-fixing conspiracy between Ramsey and its distributors. The district court submitted the case to the jury on the theory that such a conspiracy, if proven, is per se illegal. 5 The jury found that (1) Ramsey conspired to fix the resale price of winches sold to its distributors; (2) Pierce Sales' distributorship was terminated "as a result" of that conspiracy; and (3) termination proximately caused Pierce Sales $705,238.45 in damages. 6 The district court trebled the jury's award, which is the exact figure calculated by Pierce Sales' expert witness, and entered judgment against Ramsey for $2,115,715.35, plus $36,750 in attorneys' fees. Ramsey appeals.


Ramsey argues that the judgment must be reversed because of errors vitiating both the jury's liability finding and its damage award. As to liability, Ramsey argues that the district court's jury instructions on the degree of evidence necessary to support a finding of conspiracy or combination were incomplete. This error, according to Ramsey, allowed the jury to find a price-fixing conspiracy from nothing more than distributor complaints followed by termination. Ramsey also argues that the district court erroneously refused to give a requested instruction explaining Ramsey's defense--that it terminated Pierce Sales to protect its distribution system--to the jury.

As to damages, Ramsey contends that (1) the district court erroneously refused to admit two exhibits summarizing the testimony of Ramsey's damages expert; (2) the court's jury instruction on the duty to mitigate damages was inadequate; and (3) the damage award was influenced by passion and prejudice which, because the court overruled...

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