The Jeanery, Inc. v. James Jeans, Inc.

• Citation: 849 F.2d 1148
• Decision Date: 02 June 1988
• Docket Number: No. 85-3751,85-3751
• Parties: , 1988-1 Trade Cases 67,988 THE JEANERY, INC., an Oregon Corporation, and Rock Bottom Jean Co., Inc., an Oregon Corporation, Plaintiffs-Appellants, v. JAMES JEANS, INC., a Washington Corporation, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1148

849 F.2d 1148

56 USLW 2678, 1988-1 Trade Cases 67,988

THE JEANERY, INC., an Oregon Corporation, and Rock Bottom

Jean Co., Inc., an Oregon Corporation, Plaintiffs-Appellants, v. JAMES JEANS, INC., a Washington Corporation, Defendant-Appellee.

No. 85-3751.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 5, 1986.

Decided May 2, 1988.

As Amended June 2, 1988.

Justine Fischer, Stoll & Stoll, P.C., Portland, Or., for plaintiffs-appellants.

James H. Clarke, Spears, Lubersky, Campbell, Bledsoe, Anderson & Young, Portland, Or., for defendant-appellee.

Appeal from the United States District Court for the District of Oregon.

Before ALARCON, REINHARDT and THOMPSON, Circuit Judges.

DAVID R. THOMPSON, Circuit Judge:

The Jeanery, Inc., which is affiliated by common ownership with Rock Bottom Jean Co. (collectively referred to as "The Jeanery"), won a jury verdict in its antitrust suit against James Jeans, Inc., a clothing manufacturer. The Jeanery had alleged, and the jury found, that James Jeans conspired with other of its dealers to fix the resale price for James Jeans' products in violation of section 1 of the Sherman Act, 15 U.S.C. Sec. 1, and that James Jeans terminated The Jeanery as one of its distributors because The Jeanery refused to sell its goods at the desired resale price. The jury awarded The Jeanery damages in the amount of $80,556.50, which the magistrate, sitting as a district court judge, see 28 U.S.C. Sec. 636(c)(1), automatically trebled under section 4 of the Clayton Act, 15 U.S.C. Sec. 15.

James Jeans then moved for a judgment notwithstanding the verdict ("JNOV") or in the alternative for a new trial. Upon reflection, the court concluded that there was insufficient evidence of a price-fixing conspiracy to submit to the jury and, accordingly, granted the motion for JNOV. The Jeanery appeals from this judgment, arguing that there was substantial evidence supporting the existence of a conspiracy to set resale prices in violation of the Sherman Act. The Jeanery also contends that it adequately proved it was injured by the alleged conspiracy, that the amount of damages it claimed was properly proven, and that the trial court erred by suggesting a dealer must show it made a firm offer to purchase goods, which the seller refused to accept, in order to establish termination.

We have jurisdiction of this appeal under 28 U.S.C. Sec. 636(c)(3), and we affirm. Because we agree with the trial court's conclusion that there was insufficient evidence of conspiracy to submit the case to the jury, we do not reach The Jeanery's arguments regarding injury and damages. And for purposes of this appeal we accept The Jeanery's contention that James Jeans terminated it as a distributor.

I FACTS

James Jeans manufactures, markets and distributes jeans and other casual pants under various trade names, including "James Jeans." From 1981 until early 1983, James Jeans' goods were a popular item in the Pacific Northwest, the region in which James Jeans conducted the majority of its business. Through employee sales representatives, James Jeans' merchandise was sold to retail outlets. Retail merchants purchased the goods through sales representatives who periodically visited their stores, or at semiannual trade shows where James Jeans displayed its wares. In the period relevant to this appeal, it was James Jeans' practice, which was consistent with industry practice as a whole, to suggest to retail merchants that the retail price should be an amount twice that paid by the retailer to buy the goods. This suggested resale price was known in the industry as the "keystone" markup. James Jeans made clear to retailers who purchased its goods that it wanted them to charge the full keystone price when the goods were resold to consumers, and that any retailer who sold below the suggested resale price would either be terminated as a distributor of James Jeans, or would not receive as favorable treatment from the manufacturer as would complying retailers. It is undisputed that James Jeans consistently explained this policy to all distributors who purchased its goods.

Tom and Chris Ballantyne own The Jeanery and Rock Bottom Jean Co. In September 1980, The Jeanery opened an account with James Jeans and began purchasing its merchandise. In May 1981, the Ballantynes began buying James Jeans' goods for sale at their Rock Bottom stores, which specialized in off-priced goods and factory seconds. The Ballantynes testified that the James Jeans' line was so popular during the 1981-1983 period that many of The Jeanery's customers would rather go to another store than purchase jeans other than James Jeans. Consequently, it was important to The Jeanery that it receive a The Ballantynes also testified that it was their practice to sell James Jeans at a price less than keystone markup. The Ballantynes were well aware that James Jeans discouraged distributors from discounting its goods in this manner. Indeed, on several occasions sales representatives of James Jeans either visited The Jeanery outlets or met with the Ballantynes at industry trade shows and told them that James Jeans was aware of The Jeanery's discounting practices and desired The Jeanery to price at keystone. The Jeanery, however, continued to price the goods it bought from James Jeans below the desired retail price.

steady supply of James Jeans' merchandise.

Not surprisingly, other distributors of James Jeans who complied with the suggested retail price began to complain to James Jeans about The Jeanery's discounting. One of these complaints came from JJ's, one of James Jeans' best customers. Jim Lampus, the owner of JJ's, spoke with Hans Handwerk, a James Jeans representative, in April 1982, and expressed great dissatisfaction with The Jeanery's price cutting. Mr. Lampus threatened not to purchase any more goods from James Jeans unless James Jeans stopped selling to The Jeanery. Handwerk said that he would "take care of things." Several months later, in August 1982, Kris Nordstrom, another James Jeans representative, told the Ballantynes at the Seattle trade show that James Jeans would not accept any more orders from The Jeanery until Tom Ballantyne spoke with Handwerk about The Jeanery's pricing practices.

Rather than contact Handwerk, the Ballantynes contacted their attorney. When The Jeanery did not receive the jeans it had ordered from James Jeans for delivery in August 1982, the Ballantynes filed the present lawsuit against James Jeans alleging an illegal conspiracy among James Jeans and its other distributors to fix resale prices in violation of section 1 of the Sherman Act, 15 U.S.C. Sec. 1. The Jeanery contended that James Jeans terminated it as a distributor because of its failure to adhere to the illegal price-fixing agreement, and that it suffered damages as a result. This appeal followed the trial court's judgment in favor of James Jeans notwithstanding the jury's verdict in favor of The Jeanery.

II STANDARD OF REVIEW

We review a district court's grant of judgment notwithstanding the verdict by applying the same standard used by the district court. Wilcox v. First Interstate Bank, 815 F.2d 522, 524 (9th Cir.1987). JNOV is proper if " 'without accounting for the credibility of the witnesses, we find that the evidence and its inferences, considered as a whole and viewed in the light most favorable to the nonmoving party, can support only one reasonable conclusion--that the moving party is entitled to judgment notwithstanding the adverse verdict.' " Id. at 525 (citation omitted). Neither the trial judge nor this court is permitted to weigh the evidence or substitute its judgment for that of the jury, provided the jury verdict is supported by substantial evidence. Id.

The decision to grant a directed verdict or JNOV, for the standard in either context is identical, compare Peterson v. Kennedy, 771 F.2d 1244, 1252 (9th Cir.1985) (standard of review for JNOV), cert. denied, 475 U.S. 1122, 106 S.Ct. 1642, 90 L.Ed.2d 187 (1986), with id. at 1256 (standard of review for directed verdict), requires the trial court to engage in a careful reasoning process. In an antitrust case, if the evidence is entirely circumstantial, the court must decide whether a reasonable jury "could reach the suggested conclusion on the basis of the hard evidence without resorting to guesswork or conjecture." Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105, 116 (3d Cir.1980), cert. denied, 451 U.S. 911, 101 S.Ct. 1981, 68 L.Ed.2d 300 (1981); cf. Barnes v. Arden Mayfair, Inc., 759 F.2d 676, 681 (9th Cir.1985) (in antitrust case, when defendant moves for summary judgment, court must evaluate evidence in light most favorable to plaintiff and decide if jury could reach In the antitrust context, determining what amount of evidence will support a jury verdict and assessing the quality of the evidence from which an inference of illegal action may be drawn takes on a special importance. For a number of reasons, "antitrust law limits the range of permissible inferences from ambiguous evidence in a Sec. 1 case." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588, 106 S.Ct. 1348, 1357, 89 L.Ed.2d 538 (1986). Consequently, the court must closely scrutinize the evidence in a given case to avoid the danger of improper antitrust condemnations. See, e.g., id. at 594, 106 S.Ct. at 1360 ("[M]istaken inferences in cases such as this one are especially costly, because they chill the very conduct the antitrust laws are designed to protect."); see Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 763, 104 S.Ct. 1464, 1470, 79 L.Ed.2d 775 (1984).

                guilty verdict without relying on "mere speculation, conjecture, or fantasy").  At the same time, the trial court must not encroach on the role of the jury in dispute resolution.   See Filco v. Amana Refrigeration, Inc., 709 F.2d 1257, 1265 (9th Cir.), cert. dismissed, 464 U.S. 956, 104 S.Ct. 385, 78

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