Tobman v. Cottage Woodcraft Shop

• Decision Date: 16 May 1961
• Docket Number: Civ. No. 64-61.
• Citation: 194 F. Supp. 83
• Court: U.S. District Court — Southern District of California
• Parties: Herbert TOBMAN, Dave Greenfield and Norman Weiner, co-partners, doing business under the firm name of Aquasheen, Plaintiffs, v. COTTAGE WOODCRAFT SHOP, David Belsky, O. Ames Company, Earl Brooks and R. P. Brooks, individually and as co-partners doing business as R. P. Brooks & Son, Defendants.

194 F. Supp. 83

Herbert TOBMAN, Dave Greenfield and Norman Weiner, co-partners, doing business under the firm name of Aquasheen, Plaintiffs, v. COTTAGE WOODCRAFT SHOP, David Belsky, O. Ames Company, Earl Brooks and R. P. Brooks, individually and as co-partners doing business as R. P. Brooks & Son, Defendants.

Civ. No. 64-61.

United States District Court S. D. California, Central Division.

May 16, 1961.

Willard D. Horwich, Beverly Hills, Cal., for plaintiffs.

John Lloyd Welbourn, Los Angeles, Cal., and Leo Considine, Santa Ana, Cal., for defendant O. Ames Co.

John Lloyd Welbourn, Los Angeles, Cal., for Cottage Woodcraft Shop, David Belsky, Earl Brooks, R. P. Brooks and R. P. Brooks & Son.

BYRNE, District Judge.

Plaintiffs operate a swimming pool retail supply business in Los Angeles and sell, among other things, patio furniture. They filed their complaint for treble damages for violation of antitrust laws, alleging as grounds for the court's jurisdiction the Act of 1890, 26 Stat. 209, 15 U.S.C.A. §§ 1-3, and § 15 note; and 26 Stat. 210, 15 U.S.C.A. §§ 5-7, § 15 note.

The defendant Ames Co. manufactures a specialized line of patio furniture which it sells to various dealers throughout the United States, parting with full title and ownership which become vested in the buyer.

The defendants R. P. Brooks, Earl Brooks and R. P. Brooks & Son, are the Southern California agents for defendant Ames.

Defendants David Belsky and Cottage Woodcraft Shop operate a retail furniture store and sell, among other things, patio furniture manufactured by defendant Ames, thereby competing with plaintiffs.

Plaintiffs allege that defendant Ames, acting in combination with the other defendants, has attempted to fix, establish, maintain and control the retail price of its patio furniture in the following manner:

1. Defendant Ames distributes to its retail dealers a suggested retail price list.

2. Defendant Ames, by and through its agents, defendants Brooks, has persons go to the various retail dealers selling Ames patio furniture. These persons attempt to purchase such furniture for less than the suggested retail price, and then report back to defendants Brooks as to whether the retail dealers so visited are conforming to the suggested retail price.

3. Defendants Brooks then inform retail dealers selling below the suggested price that they will no longer be able to purchase Ames patio furniture unless they immediately conform to the retail prices suggested by defendant Ames.

4. If the retail dealers are unable to satisfy defendants Brooks that they will henceforth sell at the suggested retail prices, defendants Brooks notify defendant Ames to cease shipping patio furniture to such dealers.

5. Defendant Ames then ceases shipping its merchandise to the retail dealers designated by defendants Brooks.

It is next alleged that plaintiffs were the victims of the procedure outlined above when, on August 1, 1960, defendants Cottage and Belsky caused defendants Brooks to have a person go to plaintiffs' store and there try to buy Ames patio furniture for less than the price shown on the suggested retail price list supplied to plaintiffs by defendant Ames. On this occasion, plaintiffs did sell some of the furniture for less than the suggested retail price, in consequence of which defendants Brooks informed plaintiffs that defendant Ames would never thereafter supply plaintiffs with Ames patio furniture.

Plaintiffs have leased their business premises for three years with an option to renew the lease for an additional two years, beginning on March 15, 1960. Plaintiffs' reasonable expectation was that their business relationship with defendant Ames would continue for at least five years and that plaintiffs would realize a profit from the sale of Ames product of not less than $3,000 per year, or a total of $15,000 for the five-year period.

Therefore, because of defendant Ames' refusal to sell plaintiffs any more of its furniture, plaintiffs claim to have been damaged in the sum of $15,000.

As a second cause of action, plaintiffs allege that prior to August 1, 1960, defendants Cottage and Belsky, and other retail dealers selling Ames patio furniture (the names of these other dealers being unknown to plaintiffs), agreed to restrict the price at which Ames furniture would be sold to the public in Southern California. Pursuant to this agreement, all of the defendants did the acts previously described, thereby damaging plaintiffs in the sum of $15,000.

On March 13, 1961, defendant O. Ames Co. filed its alternative motions to dismiss, for summary judgment, to strike the complaint, and for a more definite statement. On March 16, 1961, the remaining defendants, Cottage Woodcraft Shop, David Belsky, Earl Brooks and R. P. Brooks, individually and as co-partners doing business as R. P. Brooks & Son, filed similar alternative motions.

It is defendants' contention that neither Count I nor Count II of the complaint states a claim upon which relief can be granted for the following reasons:

1. There is no allegation of a contract, or a combination in the form of trust or otherwise, or conspiracy, in restraint of trade.

2. There is no showing that defendants' acts have injured the public.

3. Since defendant Ames' merchandise is trademarked, defendant's requiring plaintiffs to sell this merchandise at suggested retail prices does not violate the California Fair Trade Act, and hence is not illegal under § 1 of Title 15 U.S.C.A.

These points raised by defendants will be considered together with an additional ground, viz., the effect of defendants' acts upon interstate commerce.

Necessity of alleging contract, combination or conspiracy. The Sherman Act, 15 U.S.C.A. § 1, declares illegal, "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, * * *" Therefore, a contract, combination or conspiracy is an essential element of a violation of the Sherman Anti-Trust Act, § 1 as amended, 15 U.S.C.A. § 1. Weir v. Chicago Plastering Institute, 7 Cir., 1959, 272 F.2d 883.

In United States v. Colgate & Co., 1919, 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992, the Supreme Court held that without an allegation of unlawful agreement, there was no Sherman Act violation. The Court said at page 307 of 250 U.S., at page 468 of 39 S.Ct.:

"The purpose of the Sherman Act is to prohibit monopolies, contracts and combinations which probably would unduly interfere with the free exercise of their rights by those engaged, or who wish to engage, in trade and commerce—in a word to preserve the right of freedom to trade. In the absence of any purpose to create or maintain a monopoly, the act does not restrict the long recognized right of trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal. And, of course, he may announce in advance the circumstances under which he will refuse to sell."

Thus, under the Colgate doctrine a manufacturer, having announced a price maintenance policy, may bring about adherence to it by refusing to deal with customers who do not observe that policy.

However, in Federal Trade Comm. v. Beech-Nut Packing Co., 1922, 257 U.S. 441, 42 S.Ct. 150, 66 L.Ed. 307, and United States v. Bausch & Lomb Optical Co., 1944, 321 U.S. 707, 64 S.Ct. 805, 88 L.Ed. 1024, the court narrowly limited Colgate so as to subject to Sherman Act liability the producer who secures his customers' adherence to his resale prices by methods which go beyond the simple refusal to sell customers who will not resell at stated prices.

The recent case of United States v. Parke, Davis & Co., 1960, 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 contains a thorough analysis of the cases in which the Supreme Court has considered the question of the type of acts necessary to constitute a combination in restraint of trade, and hence a violation of the Sherman Act. In the Parke case, the court stated at page 44 of 362 U.S., at page 511 of 80 S.Ct.:

"* * * The Bausch & Lomb and Beech-Nut decisions cannot be read as merely limited to particular fact complexes justifying the inference of an agreement in violation of the Sherman Act. Both cases teach that judicial inquiry is not to stop with a search of the record for evidence of purely contractual arrangements. The Sherman Act forbids combinations of traders to suppress competition. True, there results the same economic effect as is accompanied by a prohibited combination to suppress price competition if each customer, although induced to do so solely by a manufacturer's announced policy, independently decides to observe specified resale prices. So long as Colgate is not overruled, this result is tolerated but only when it is in consequence of a mere refusal to sell in the exercise of the manufacturer's right `freely to exercise his own independent discretion as to parties with whom he will deal'. * * * When the manufacturer's actions, as here, go beyond mere announcement of his policy and the simple refusal to deal, and he employs other means which effect adherence to his resale prices, this countervailing consideration is not present and therefore he has put together a combination in violation of the Sherman Act. Thus, whether an unlawful combination or conspiracy is proved is to be judged by what the parties actually did rather than by the words they used. * * *"

Thus, in order to be entitled to relief under the Sherman Act, plaintiff need not allege or prove either an express or implied agreement to fix prices. However, it is essential that he allege facts from which a combination for this purpose can be found; for the manufacturer's unilateral act in refusing to sell to a dealer who will not observe suggested retail prices, is not a violation of the Sherman Act.

In the instant case, there is no allegation in haec verba of a contract,...