Pounds Photographic Labs, Inc. v. Noritsu America Corp.

• Court: U.S. Court of Appeals — Fifth Circuit
• Writing for the Court: Before POLITZ, JOLLY and HIGGINBOTHAM; E. GRADY JOLLY
• Citation: Pounds Photographic Labs, Inc. v. Noritsu America Corp., 818 F.2d 1219 (5th Cir. 1987)
• Decision Date: 15 June 1987
• Docket Number: No. 86-1340,A-F,86-1340
• Parties: , 1987-1 Trade Cases 67,599 POUNDS PHOTOGRAPHIC LABS, INC., Plaintiff-Appellee, v. NORITSU AMERICA CORP., et al., Defendants, Back-In-lash, Ltd., et al., Defendants-Appellants.

Page 1219

818 F.2d 1219

56 USLW 2041, 1987-1 Trade Cases 67,599

POUNDS PHOTOGRAPHIC LABS, INC., Plaintiff-Appellee, v. NORITSU AMERICA CORP., et al., Defendants Back-In-A-Flash, Ltd., et al., Defendants-Appellants.

No. 86-1340.

United States Court of Appeals Fifth Circuit.

June 15, 1987.

Rehearing and Rehearing En Banc Denied July 16, 1987.

Jack N. Price, Austin, Tex., for Back-In-A-Flash, Ingraham, McNaron.

David L. Orr, Michael G. Burk, McGinnis, Lochridge, Kilgore, Austin, Tex., for plaintiff-appellee.

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

Before POLITZ, JOLLY and HIGGINBOTHAM, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

Back-In-A-Flash, Ltd. ("BIAF"), Hubert Ingraham, and Gerald McNaron appeal from the district court's judgment awarding Pounds Photographic Labs, Inc. ("Pounds Labs"), damages in the amount of $170,000 for injuries caused by the appellants' violations of the Texas antitrust statutes. Because we conclude that the filing of Pounds Labs' suit was timely and because the district court's judgment is supported by both law and evidence, we affirm.

I

Danny Pounds established Pounds Labs in Austin, Texas, in 1976 to engage in professional photofinishing. Sometime afterwards, Elwinger, a salesman representing Noritsu America Corp. ("Noritsu") made a sales call on Danny Pounds and was referred to Ingraham, a Pounds Labs employee, to whom Elwinger described Noritsu's Quick Service System (QSS). ¹ Ingraham and McNaron, another Pounds Labs employee, were interested in the system but Danny Pounds was not.

In August 1980, Ingraham and McNaron resigned from Pounds Labs and the next month, purchasing Noritsu's QSS, they opened their first mini-lab, under the name "Back-in-a-Flash." By May 1982, they had six locations in Austin and ten by the time of trial.

After a favorable article about QSS appeared in Parade magazine in October 1980, Noritsu developed a backlog, delaying delivery by twelve to eighteen months in January 1981. During this time, Noritsu created an "open city" policy, giving immediate shipment to labs to be opened in cities with no other QSS lab. Moreover, at about this time (November 1980), Noritsu had circulated a memo stating that it would give "a two year guarantee of non-compete location" to purchasers of QSS.

In March 1981, Pounds called Elwinger about buying a QSS and was told that delivery would be in twelve to eighteen months, but that he could get priority delivery by shipping to an "open city" such as El Paso. Pounds then ordered five units. In April, Elwinger scheduled delivery for one Pounds unit in El Paso and another in New Mexico. Elwinger later heard, however, that Pounds was going to take delivery of the unit in El Paso and then ship it on his own to Austin, although Pounds denied this. Elwinger then stated, "If I find the unit is going anywhere other than El Paso, I'll do everything in my power to delay shipment, delay installation and training and voiding the warranty ... I don't play games."

The "open city" policy was dropped in January or February 1982, and Elwinger was transferred in January 1982 and replaced by Oliver. In July 1982, Pounds ordered a unit from Oliver, which was delivered in October 1982, and installed in Austin. Pounds has since opened units in other cities under the names of "Photo House" and "Texas One Hour."

In January 1984, Oliver, who had become friendly with Pounds, gave Pounds documents from Elwinger's files. Two were proposals for a joint venture between Elwinger, Ingraham and McNaron. One was a letter from Fry, the president of United Bank of Texas, dated October 22, 1982, to Noritsu, relating to a loan from the bank to BIAF. In the letter, the bank stated: "It is our understanding that based on the sales of [BIAF], that you intend to grant them some exclusivity to your product in the Austin market." Noritsu responded by denying such a policy, noting that it was illegal, but stating that Noritsu was reducing sales efforts in cities where it had sold units.

Since Pounds obtained his QSS units, all of his operations, except that in Austin, have been successful. He blames the lack of success of the Austin operation on BIAF's two-year head start with its QSS units.

II

On August 3, 1984, Pounds Labs filed suit against Noritsu, Elwinger, BIAF, Ltd., Ingraham, McNaron and BIAF, Inc., in federal district court, alleging (1) conspiracy to monopolize, (2) attempt to monopolize, (3) monopolization in violation of section 2 of the Sherman Act, (4) restraint of trade in violation of section 1 of the Sherman Act, (5) "trust" and conspiracy in restraint of trade in violation of the pre-1983 Texas Antitrust Statutes, and (6) tortious interference with prospective business relationships. After a trial, the jury returned a verdict rejecting Pounds Labs' contention that "mini-lab" or "one-hour" photofinishing in the Austin metropolitan area is a relevant market or submarket, and the contentions of monopolization and attempted monopolization of such market, finding that the defendants had not conspired to monopolize the market or to unreasonably restrain trade, and that BIAF, Ingraham, and McNaron had not wrongfully interfered with Pounds Labs' prospective contractual relationship with Noritsu. The jury found, however, that Noritsu, Elwinger, Ingraham, and McNaron had entered into a "trust," that Elwinger, Ingraham, and McNaron had entered into a conspiracy in restraint of trade under the Texas statutes, that Pounds Labs had sustained injury thereby, and awarded damages in the amount of $170,000.

Noritsu, Elwinger, BIAF, Ingraham and McNaron appealed. Since then, however, Noritsu and Elwinger have settled, leaving BIAF, Ingraham and McNaron as the appellants in this case. Hence the term "appellants" as used in the body of this opinion refers only to BIAF, Ingraham and McNaron.

III

The appellants raise half a dozen challenges to the district court's judgment. They argue that: (1) Pounds Labs' state antitrust action was time-barred; (2) the Texas antitrust statutes did not apply to this case; (3) the evidence presented at trial did not support a finding of liability on the part of the appellants; (4) damages were not available in this case; (5) the Texas antitrust statutes were preempted by federal law, and (6) there was insufficient evidence to support the damage award in this case. We reject the first five arguments made by the appellants and hold that the sixth was not properly preserved on appeal.

IV

We first address the statute of limitations issue. Pounds Labs' state antitrust action was brought under the Texas antitrust statutes, Tex.Bus. & Comm.Code Ann. Secs. 15.02 and 15.03 (Vernon 1968), as they existed before they were amended on August 29, 1983, to provide for a four-year limitation period. 1983 Tex.Gen.Laws, Ch. 519 Sec. 1 at 3010. All parties agree that Texas courts apply statutes as they existed at the time the action accrued. See Riverside National Bank v. Lewis, 603 S.W.2d 169, 172 (Tex.1980). The pre-August 1983 version of the Texas antitrust statutes specified no limitations period. The question is which statute of limitations to apply. The appellants argue that a two-year statute of limitations governs under the old antitrust statutes and that therefore Pounds Labs' claims are barred. Pounds Labs, on the other hand, maintains that a four-year limitations period applies to its claims, and they are not barred. Pounds Labs is correct.

At the time Pounds Labs' cause of action accrued, there were three general Texas statutes of limitations that were arguably pertinent to Pounds Labs' state antitrust claims. ² A two-year statute, Tex.Rev.Civ.Stat.Ann. art. 5526, applied to various actions, most of them in tort. ³ A four-year statute applied to "actions for debt." Tex.Rev.Civ.Stat.Ann. art. 5527. A four-year statute, Tex.Rev.Civ.Stat.Ann. art. 5529, a residual provision, established a limitation period for actions not otherwise provided for. ⁴

Pounds Labs' state antitrust cause of action was created by statute. Both this court and Texas courts have held that under Texas law liability created by statute is an action for debt for limitations purposes. McGuire v. Baker, 421 F.2d 895, 898 (5th Cir.1970); Rose v. First State Bank, 122 Tex. 298, 59 S.W.2d 810, 811 (1933); Uhler v. Todd Houston Shipbuilding Corp., 198 S.W.2d 631, 632 (Tex.Civ.App.1946). In particular, this court has held that for limitations purposes under Texas law, an antitrust claim brought under the federal antitrust statutes (at a time when these statutes did not have their own statute of limitations) was an action for debt. Green v. Wilkinson, 234 F.2d 120 (5th Cir.1956).

Although it is true, as the appellants point out, that these prior decisions held that the two-year statute of limitations applied to actions based upon statutory liability, this was because prior to 1979, two kinds of action for debt were recognized for limitations purposes: actions for debt where the indebtedness was evidenced by a written contract, and actions for debt where it was not. Claims falling under the first category were governed by a four-year statute of limitations, Tex.Rev.Civ.Code Ann. art. Sec. 5527 (Vernon 1958), while claims under the second category were governed by a two-year statute of limitations, Tex.Rev.Civ.Code Ann. art. 5526(4) (Vernon 1958). Claims based on statutory liability were considered actions for debt where the indebtedness was not evidenced by written contract. Rose, 59 S.W.2d at 811; Uhler, 198 S.W.2d at 632, and were therefore governed by the two-year statute of limitations. Effective August 17, 1979, however, that statute was amended to exclude its applicability to actions for debt. ⁵ After that date all actions for debt were governed by a four-year statute of limitations, Tex.Rev.Civ.Stat.Ann. art. 5529. Since Pounds Labs' cause of action accrued after August 27, 1979, its state antitrust claims were...