Southern Rendering Co. v. Standard Rendering Co.

• Decision Date: 13 April 1953
• Docket Number: Civ. A. No. 2340.
• Citation: 112 F. Supp. 103
• Parties: SOUTHERN RENDERING CO. v. STANDARD RENDERING CO.
• Court: U.S. District Court — Eastern District of Arkansas

112 F. Supp. 103

SOUTHERN RENDERING CO. v. STANDARD RENDERING CO.

Civ. A. No. 2340.

United States District Court E. D. Arkansas, W. D.

April 13, 1953.

Edward L. Wright, Wright, Harrison, Lindsey & Upton, R. C. Limerick, Jr., and Ashley Cockrill, Little Rock, Ark., for plaintiff.

Leon B. Catlett, Catlett & Henderson, Little Rock, Ark., for defendant.

DELEHANT, District Judge.

Ruling is now made upon a motion tendered by the defendant for the entry in its favor of a summary judgment. The motion is being denied and overruled. This memorandum will explain briefly the consideration underlying the action it announces. Inasmuch as the case will remain pending for trial in the usual manner, it is thought that an extended discussion of the issues, and especially of collateral points, is not in order. Another judge will undoubtedly try the action. In that service he ought to be quite unhampered by any unnecessary comment on the part of one who rules upon a preliminary issue. Nor should such comment be offered in disregard of the consequence which, without judicial design, it might have upon the manner of the further presentation of the case by counsel.

The plaintiff, an Arkansas corporation, sues the defendant, a Delaware coporation doing business in Arkansas, and demands injunctive relief against certain acts of the defendant alleged to violate sections 1 to 7 of the Sherman Act and sections 15, 18, 19, 22 and 26 of the Clayton Act, Title 15 U.S.C.A., and also damages, costs and attorneys fees.

The complaint, among other allegations, makes the assertions which are briefly summarized in the next following three paragraphs.

Both parties to the suit are engaged in the rendering business within the Little Rock area, the plaintiff operating a plant in Little Rock and the defendant maintaining one in Jacksonville. The prime function of the rendering industry is the conversion of inedible by-products of the slaughtering of food animals into marketable products. The raw material of the enterprise includes shop fat, suet, offal, bones, unrefined grease and meat trimmings. Processed, these become tallow, soap grease, cracklings and the like. Raw materials are purchased and gathered from local slaughter houses, retail butchers, restaurants, large meat consuming institutions and miscellaneous persons owning dead animals. The collection is made by renderers' trucks periodically covering regular routes with stops at probable sources of supply. There is no open market in which such raw materials may be obtained; and the supply thereof is limited by the available material within the Little Rock area during any examined period, and neither increases nor decreases from time to time in accordance with a prevailing price structure. On the completion of the rendering process, a substantial portion of the final product is shipped in interstate commerce to reach its ultimate destination and place of use.

The defendant's alleged acts, whose irregularity is asserted, are said to have been planned and accomplished within the states of Arkansas, Missouri, Texas, Kansas and Illinois and in other parts of the United States and to involve commerce among the states and to constitute restraints upon trade and commerce. The parties to the action are alleged to have been the only renderers engaged in their business within or near Little Rock, Arkansas since January 1, 1948 and in that interval to have been in active competition with each other. The defendant is closely affiliated with several other corporations engaged in the same business located in Chicago and East Saint Louis, Illinois. They operate in conjunction with each other and, together, have resources sufficiently large to enable them to encounter substantial losses within their Little Rock business area over a considerable period of time in view of their ability to offset such losses by profits from operations in other areas less competitive in character. The combined assets of the defendant and the other corporations with which it is said to be affiliated are approximately $2,000,000, in contrast with the plaintiff's total worth of $100,000. The acquisition of raw materials by the plaintiff occur only in the Little Rock area, whereas the operations of the defendant cover many other communities in different states. In arriving at prices which may reasonably and prudently be paid for raw materials, each of the parties, according to sound business methods, should compute such prices according to the prevailing selling price of their respective manufactured products, after giving consideration to operating and manufacturing costs and a reasonable, but small, margin of profit.

Commencing about January 1, 1948, the defendant has attempted to monopolize the rendering business within and in the vicinity of Little Rock by offering and paying unreasonably high prices for the raw materials of the business. Such prices were from 10% to 20% higher than a figure at which a reasonable manufacturing profit could be yielded; and in actual operation resulted in net unit losses to any renderer paying such prices. That course was pursued with the knowledge that the plaintiff would thereby be compelled either to pay such prices and undergo the losses inevitably resulting therefrom, or not to meet such competition and thereby to lose its sources of raw materials and be compelled eventually to discontinue its business. In its operation at such unjustified price levels, the defendant has offered in advertising to pay for dead animals at prices not justified by market conditions; and, on occasion, animals received by the defendant in consequence of such advertisement have not been paid for by it. In furtherance also of its design the defendant has on occasion sent unmarked and unidentified trucks to customers from whom the plaintiff has generally purchased raw materials and by representing to such customers that the trucks were being operated in behalf of the plaintiff, has purchased raw materials which were otherwise intended for sale to the plaintiff. The defendant, through its agents, has avowed its intention to drive the plaintiff out of business through freezing, or ruthless competitive, methods. In consequence of such acts and practices of the defendant, the plaintiff sustained a loss of $21,500 between January 1, 1948 and the institution of the action.

In addition to the foregoing allegations of an attempt to monopolize, the plaintiff also alleges that the defendant has entered into a combination and conspiracy in restraint of trade; in support of which it reavers all of the foregoing charges and also makes the following further claims. The defendant has combined and conspired with at least three other designated corporations and at least seven individuals who are officers, directors or employees of such corporations. All such conspirators have agreed among themselves to erect a device by which the plaintiff would be caused to purchase raw materials for its business at artificial and unreasonably high prices with the object and for the purpose of causing financial injury to the plaintiff as the defendant's sole competitor, and with the ultimate purpose of destroying and stifling and eliminating all of the defendant's competition within the Little Rock business area. In furtherance of such conspiracy and combination, the defendant paid unreasonably high prices for raw materials, knowing that the plaintiff would be forced to meet such prices with consequent losses in its business, or fail to obtain a supply of materials for processing.

The defendant early moved to dismiss the complaint for failure to state a claim upon which relief could be granted. Rule 12(b), Federal Rules of Civil Procedure, 28 U.S.C.A. This motion was seasonably denied by Judge Trimble. Thereafter, and on March 5, 1952, at the instance of the defendant though eventually by stipulation, the defendant took the deposition of one Douglas G. Brown, a Director and the Secretary-Treasurer and Manager of the plaintiff. The deposition thus taken, with the exception of a few concluding questions of a clarifying character, includes interrogation in behalf of the defendant only. The testimony was taken adversarily and in the way of an unfriendly examination of a hostile witness. It has been transcribed and now constitutes a part of the record in the case. Brown testified, in part, as follows:

The plaintiff was incorporated in 1946 with an authorized capitalization of $30,000 and a paid in and issued capital of $14,000. It commenced business about April 7, 1947. It claims damages for various periods of time between January 1, 1948 and December 31, 1951. While some of its fiscal years within that interval may have shown net gains, during all such periods losses were sustained as the proximate result of the competitive practices of the defendant, without which the plaintiff would have received much higher profits. During the time in question the plaintiff has increased its inventory of equipment and plant facilities. At intervals within the period of two years before the taking of the deposition the plaintiff has paid for some raw materials prices higher than those paid by the defendant. The plaintiff has purchased raw materials from at least one truck operator who was a former employee of the defendant and has done so with knowledge that such materials were purchased by the truck operator from former vendors or customers of the defendant. The defendant on certain identified occasions has paid for specific raw materials prices higher than those paid by the plaintiff. But on several occasions and with numerous customers the plaintiff under the spur of competition has paid prices higher than those offered by the defendant and obtained the raw materials for which the two parties were in competition.

The witness in his deposition generally undertook to justify as defensible prices paid by the plaintiff for raw materials even where such...