Schwing Motor Company v. Hudson Sales Corporation

• Decision Date: 28 February 1956
• Docket Number: 6363.,Civ. A. No. 6362
• Parties: SCHWING MOTOR COMPANY, Incorporated, a Maryland corporation, Plaintiff, v. HUDSON SALES CORPORATION, a Michigan corporation, et al. BELAIR ROAD HUDSON, Inc., a Maryland corporation, Plaintiff, v. HUDSON SALES CORPORATION, a Michigan corporation, et al. Defendants.
• Court: U.S. District Court — District of Maryland

138 F. Supp. 899

SCHWING MOTOR COMPANY, Incorporated, a Maryland corporation, Plaintiff, v. HUDSON SALES CORPORATION, a Michigan corporation, et al.

BELAIR ROAD HUDSON, Inc., a Maryland corporation, Plaintiff, v. HUDSON SALES CORPORATION, a Michigan corporation, et al. Defendants.

Civ. A. Nos. 6362, 6363.

United States District Court D. Maryland, Civil Division.

February 28, 1956.

D. Sylvan Friedman and Wilson K. Barnes, Baltimore, Md., for plaintiffs.

William L. Marbury and John Martin Jones, Jr., Baltimore, Md., and Richard W. Larwin and Beaumont, Smith & Harris, Detroit, Mich., for Hudson Sales Corp., Hudson Motor Car Co., and Frank Burnham.

John S. Stanley, Roger A. Clapp and Hershey Donaldson, Williams & Stanley, Baltimore, Md., for Bankert Hudson, Inc., and Martin A. Bankert.

THOMSEN, Chief Judge.

Defendants have moved to dismiss the amended complaints on the ground that they do not state claims upon which relief can be granted in these two actions, which are brought to recover treble damages under the anti-trust laws, 15 U.S. C.A. §§ 1, 2, 15. Motions to dismiss the original complaints on the same ground were granted by Judge Coleman, with leave to amend. The principal question in each case is whether an agreement between an automobile manufacturer and a retail dealer, pursuant to which the manufacturer refuses to renew expiring agreements with two other dealers, and gives the dealer a "virtual monopoly" of the sale of one make of automobile in one city, is a combination or conspiracy to monopolize trade or commerce, or in restraint of trade or commerce, in violation of the Sherman Act and of the Clayton Act.

The Parties

The amended complaints are essentially similar, and will be referred to as "the complaints". The words "plaintiffs" will be used to mean the plaintiffs in both cases. When differentiation is desirable, "Schwing" will refer to the Maryland corporation, Schwing Motor Company, Inc., its stockholders, and the individual proprietor whose business it took over in 1948; "Belair Road" will refer to the other plaintiff, also a Maryland corporation, and to its sole stockholder.

The defendants in each case are: Hudson Sales Corporation, a Michigan corporation, which "substantially" acts as the sales department of the defendant Hudson Motor Car Company, also a Michigan corporation, Frank Burnham, dealer representative of the two Hudson companies in the Maryland area, and Claude W. Margetts, zone manager of the two companies in the Maryland-District of Columbia area, all of whom will be referred to collectively as "Hudson"; Bankert Hudson, Inc., a Maryland corporation, and Martin A. Bankert, its president, who will be referred to collectively as "Bankert".

Allegations of the Complaints

Schwing alleges that in 1944 Hudson urged Schwing, then a Ford dealer at 3324-32 Keswick Road in (north) Baltimore, to establish a Hudson agency in Baltimore and surrounding territories at the Keswick Road location, there being then no effective Hudson representation in the Baltimore area. Schwing agreed to become a master franchise dealer for Hudson upon assurance that he would receive an annual quota of 150 Hudson automobiles. Between 1945 and 1950, in accordance with the request and insistence of Hudson, Schwing purchased and improved a used-car lot, improved his Keswick Road building, purchased adjoining properties, and advertised Hudson automobiles, parts and accessories. The business was successful; in 1951 Hudson recognized Schwing as one of the foremost Hudson dealers in the entire country, and its dealership agreement was renewed each year until September 30, 1952.

Belair Road alleges that it became a Hudson master dealer in 1947, at the suggestion of Hudson, rented a building at 4709 Belair Road in (northeast) Baltimore, purchased equipment, etc. Its dealership agreement was renewed each year until September 30, 1952.

Both complaints allege that in March, 1951, without prior knowledge by plaintiffs, Bankert "opened a Hudson Master Dealership" at Howard and Twenty-fifth Streets, in (north-central) Baltimore; that plaintiffs were assured by Hudson at or about that time that their dealerships would be renewed; and that they were renewed for the year beginning October 1, 1951, but not thereafter.

It is alleged that beginning in September, 1951, defendants, with full knowledge of plaintiffs' contracts, combined, conspired and agreed with each other and with divers other persons, "to restrain a part of the trade and commerce in Hudson automobiles and Hudson automobile parts and accessories among the several States"; and did restrain said trade and commerce in violation of 15 U.S.C.A. § 1, and combined, etc., "to monopolize a part of the trade and commerce in Hudson automobiles", etc. and have "monopolized and attempted to monopolize said trade and commerce", in violation of 15 U.S.C.A. § 2.

The complaints allege that the object and purpose of said conspiracy was to eliminate each of the plaintiffs from competition with Bankert in the sale of such automobiles and parts, to restrain and restrict the interstate shipment of such automobiles and parts, and to create a monopoly thereof in the Baltimore area and the State of Maryland to the end that higher prices might be obtained from the purchasing public, to fix arbitrarily the price of used Hudson automobiles offered in trade for new Hudson automobiles below the true and competitive price thereof in order to obtain abnormally large and non-competitive profits from such trade-ins, and to monopolize the supplying of Hudson parts, accessories and Hudson service to the public in Maryland, particularly in the Baltimore area, in order to obtain higher prices therefor and to render less efficient and less convenient service at higher cost.

Both complaints allege the following specific acts in furtherance of the alleged conspiracy: in violation of its contracts with plaintiffs, Hudson, at the instance of Bankert, refused to deliver to plaintiffs their respective quotas of new Hudson automobiles, although they had been properly ordered and were available; Bankert circulated rumors among plaintiffs' customers, and Burnham told the finance company which financed plaintiffs' sales, that plaintiffs would lose their franchises; Bankert, with the assistance of Hudson, attempted to employ certain persons then employed by plaintiffs; and Bankert induced Hudson to decline to renew the franchise or dealership agreements with plaintiffs which expired on September 30, 1952, and which would otherwise have been renewed. Schwing's complaint adds that Margetts and Burnham asked Schwing to resign his dealership in September, 1951; Belair Road's complaint adds that Hudson advised other dealers not to sell new Hudson automobiles to it. Each plaintiff alleges the refusal of Hudson to renew the other's franchise, and both allege that as a result of the refusal of Hudson to renew plaintiffs' franchises, Bankert has a "virtual monopoly" of the sale of new Hudson automobiles and Hudson automobile parts and accessories in the City of Baltimore, and has arbitrarily fixed the price offered for trade-ins at prices lower than the true competitive prices thereof, and thus has obtained abnormally large non-competitive profits on such trade-ins.

Both complaints allege that as a result of the combination, conspiracy and "virtual monopoly", the public has been injured, in that: (a) in 1952 fewer automobiles moved in interstate commerce into the State of Maryland than would otherwise have moved; in support of this contention it is alleged that Hudson refused to accept orders for 357 automobiles in accordance with plaintiffs' quotas; it is alleged on information and belief that these automobiles were not otherwise sold in Maryland, and plaintiffs believe that but for the conspiracy they could have sold even more Hudsons; (b) during the first five months of 1953 the registrations of New Hudson automobiles in the City of Baltimore were less by 95 than such registrations for the comparable period of 1952; this reduction was much greater than the average for 32 states for the 12 months ending May 31, 1953; and it is concluded that the difference between the 1952 registrations and 1953 registrations, together with additional new Hudson automobiles, would have been sold in the Baltimore area had the plaintiffs still been operating as Hudson agents; (c) higher acquisition prices, i. e. the retail prices of new Hudson automobiles less the used Hudson automobile trade-in allowances, have been paid, are being paid and will be paid to Bankert by the public; (d) and higher prices have been, are being and will be charged for Hudson parts, accessories and service, and the service is less efficiently performed and may only be obtained at a less convenient source and from less efficient personnel than was the case prior to the consummation of the unlawful conspiracy and combination and virtual monopoly.

The complaints allege that plaintiffs have been damaged in the "actual" amounts of $419,064.71 and $717,698.16 respectively, and claim treble those amounts, with costs and attorneys' fees.

Plaintiffs have thus alleged facts which would support claims against Hudson for breach of contract and which might support claims against Bankert for tortious interference with contract rights. But plaintiffs' counsel stated in open court that plaintiffs are not pressing any such claims in these cases, which are based solely on the claimed violations of the anti-trust laws. Moreover, there is no diversity of citizenship between either plaintiff and Bankert.

It is not alleged in the complaints, but it was stated without denial at the hearing, that in 1951 and 1952 there were two other Hudson dealers in the Baltimore metropolitan area in addition to Schwing, Belair Road Hudson, and Bankert: one in Dundalk, in southeast Baltimore, the other in Catonsville, over the city line to the southwest. Plaintiffs concede that...