Siegel v. Chicken Delight, Inc.

• Decision Date: 17 August 1967
• Docket Number: Civ. No. 46271.
• Citation: 271 F. Supp. 722
• Parties: Harvey SIEGEL and Elaine Siegel, husband and wife, David Witt, Robert Van Schaick, Ralph R. Andre and Ruth L. Andre, husband and wife, and Richard Zachary, Plaintiffs, v. CHICKEN DELIGHT, INC., Chicken Delight of California, Inc., and Consolidated Foods Corporation, Defendants.
• Court: U.S. District Court — Northern District of California

271 F. Supp. 722

Harvey SIEGEL and Elaine Siegel, husband and wife, David Witt, Robert Van Schaick, Ralph R. Andre and Ruth L. Andre, husband and wife, and Richard Zachary, Plaintiffs, v. CHICKEN DELIGHT, INC., Chicken Delight of California, Inc., and Consolidated Foods Corporation, Defendants.

Civ. No. 46271.

United States District Court N. D. California.

August 17, 1967.

COPYRIGHT MATERIAL OMITTED

Broad, Busterud & Khourie, Michael N. Khourie, Royce H. Schulz, San Francisco, Cal., for plaintiffs.

Caspar W. Weinberger, M. Laurence Popofsky, Richard L. Goff, Heller, Ehrman, White & McAuliffe, San Francisco, Cal., for defendants.

MEMORANDUM OPINION AND ORDER

GEORGE B. HARRIS, Chief Judge.

This private treble damage suit initiated by five Northern California "Chicken Delight" franchisees on behalf of themselves and all others similarly situated throughout the United States is before this court on cross-motions filed pursuant to the provisions of Fed.R. Civ.P. 23, that is, on the part of defendants, that the representational allegations contained in the complaint be stricken, and on the part of the plaintiffs, that the action be allowed to continue as a class action.

The complaint is framed within two causes of action. The defendants are charged in the first count, which is an amalgamation of several theories, predicated on Federal law, with asserted violations of (a) Section 1 of the Sherman Act, conspiracy in restraint of trade; (b) Section 2 of the Sherman Act, monopolization and attempted monopolization; (c) Section 3 of the Clayton Act, exclusive dealing and tie-in sales; (d) price discrimination under the Robinson-Patman Act; and (e) anti-competitive merger, Section 7 of the Clayton Act.

The second count runs in favor of all franchisees located within California and is based on the California anti-trust statute commonly referred to as the Cartwright Act, § 382 of the California Code of Civil Procedure. Joinder has been allowed in this regard pursuant to the doctrine of pendent jurisdiction. Plaintiffs request money damages in a presently undetermined sum, and injunctive relief to arrest the continuance of defendants' alleged illegal conduct. Each and every allegation has been denied by the defendants who have further interposed a special defense based upon the in pari delicto theory.

At the outset, the court observes that nowhere is there expressed any dominate judicial policy which would remove anti-trust suits as a matter of course from within the province of Rule 23. In fact under the less flexible predecessor to the amended class rule, we find cases such as Kainz v. Anheuser-Busch, 194 F.2d 737 (7th Cir. 1952) and City of Philadelphia v. Morton Salt Co., 248 F.Supp. 506 (E.D.Pa.1965) wherein the use of the class action schematic has received the stamp of judicial approval. Moreover, the new, precise, yet elastic provisions of Rule 23, which are now the judicial yardstick, permit a class suit in cases like the one before us, provided of course, the necessary elements essential thereto are present. "The complete overhaul of Rule 23 significantly expands the scope of class actions * * * the district judge unhampered by traditional classifications, is given a large measure of discretion in balancing conflicting interests." Georgetown L.J. Vol. 54, p. 1204.

A

THE CLASS IS SO NUMEROUS THAT JOINDER OF ALL MEMBERS IS IMPRACTICABLE (23a 1); AND A CLASS ACTION IS SUPERIOR TO OTHER AVAILABLE METHODS FOR THE FAIR AND EFFICIENT ADJUDICATION OF THE CONTROVERSY (23b 3)

Although the defendants in form attack only the superiority of method clause, an inter-relationship exists in esse between the two that demands concomitant consideration. It is undisputed that potentially, the class involves upwards of 650 members, that is, all "Chicken Delight" franchisees in the United States. As such, it would be specious to argue that wholesale joinder would be either practicable or desirable. Yet that is precisely the position taken by the defendants when they urge that there are other more appropriate methods for obtaining adjudication such as permissive joinder under Fed.R.Civ.P. 20, or intervention pursuant to Fed.R.Civ.P. 24. Either device could conceivably bring before this forum 200, 300 or even 600 party-plaintiffs thus complicating rather than simplifying the proceedings.

In addition, there is no indication that any other related litigation has been commenced by other members of the class nor is it apparent that the litigation should not be concentrated in a particular forum, Fed.R.Civ.P. 23(b) (3), thus achieving "economies of time, effort, and expense, and promote uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results." Advisory Committee's Notes, 39 F.R.D. 102, 103.

The main thrust of defense counsel under this sub-head, lies however within the confines of 23(b) (3) (D), "the difficulties likely to be encountered in the management of a class action." It is prognosticated that the task of discovery would be both financially overwhelming and incredibly complex, based upon the assumption that each consenting member of the class would intervene with his own counsel and further that each member's claims would be separate and distinct from one another, thus pointing to "the interest of members of the class in individually controlling the prosecution or defense of separate actions." (Rule 23b 3 A)

The court concurs in neither the presagements nor the conclusion. Too little weight has been ascribed to the flexible provisions of Rule 23, particularly 23(c) (4) which allows the court "When appropriate" to limit the class action to particular issues or to divide the class into sub-classes, and more importantly, to "* * * make appropriate orders: (1) determining the course of proceedings * * *, (3) imposing conditions on the representative parties * * *, and (5) dealing with similar procedural matters. The orders may be combined with an order under Rule 16, and may be altered or amended as may be desirable from time to time." Rule 23(d), Fed.R.Civ.P. This is certainly a far cry from the judicial arsenal available to a Pennsylvania District Court when in November, 1965, it ruled as proper a class action, antitrust suit involving several thousand potential plaintiffs. City of Philadelphia v. Morton Salt Company, supra.

Finally, "To permit the defendants to contest liability with each claimant in a single, separate suit, would, in many cases give defendants an advantage which would be almost equivalent to closing the door of justice to all small claimants. This is what we think the class suit practice was to prevent. Like many another practice, necessity was its mother. Its correct limitations must be ascertained by the experiences which brought it into existence." Weeks v. Bareco Oil Co., 125 F.2d 84, 90 (7th Cir. 1941).

B THERE ARE QUESTIONS OF LAW OR FACT COMMON TO THE CLASS WHICH PREDOMINATE OVER ANY QUESTIONS AFFECTING ONLY INDIVIDUAL

MEMBERS. RULE 23(a) (2) AND 23(b) (3)

The defendants have briefed these prerequisites in extenso and for facility of discussion have listed under appropriate headings, nine general areas of diversity of issue that are alleged to exist among the members of the class, to-wit: (1) damages, (2) and (3) required or forced purchases, (4) coercion, (5) misrepresentations, (6) alleged price fixing, (7) price discrimination, (8) monopoly, and (9) merger.

Initially, the defendants would have the court focus its attention on "the immense difficulties and complexities of determining the amount of damages allegedly suffered" by the various franchisees. Suffice it to say, any detailed discussion of the subject at this juncture of the proceedings would be premature, although "Assuming that an unlawful conspiracy or combination in restraint of interstate commerce exists, then, if any person is injured by it in his business or property rights, he may recover." Dowd v. United Mine Workers of America, 235 F. 1, 9 (8th Cir. 1916). And that should the plaintiffs prevail, damages might have to be established on an individual basis was recognized and found to be no obstacle to the maintenance of an anti-trust class suit by the court in Alabama Independent Serv. S. Ass'n v. Shell Petroleum Corp., 28 F. Supp. 386 (N.D.Ala.1939).

The remaining alleged variants are nothing more than a categorization on the part of the defense of the various separate violations pleaded by the plaintiffs within the first count of their complaint. In other words, the court is seemingly asked to prophesy which of the several theories will in fact be relied upon and pursued through trial by the plaintiffs. The invitation to pre-try the case through the vehicle of this motion must be respectfully declined, although some comment is in order.

The integral core of the complaint is contained in paragraphs 17 and 18 thereof. A careful reading of the pleadings reveals that the franchise agreement is the focal point of the alleged acts perpetrated by the defendants to fix prices, to tie-in product sales, to discriminate among the franchisees as to prices charged, and to compel or coerce compliance by the threat of franchise cancellation. Moreover, by affidavit, counsel for the plaintiffs has stated that he has examined substantially all the contracts and that they are similar in provisional content. To argue as defendants do that there are differences in the products required to be purchased; that there are territorial or market dissimilarities; that "the nature, types, extent and effects of such coercive activities could not conceivably be similar in the case of all 700 franchisees"; that respecting price fixing, "It would be nonsense to suggest that, as applied to 700 franchisees throughout the United States for a considerable number of years, there has been anything approaching uniformity in `menu approval' or defendants' advertising...