Top-All Varieties, Inc. v. Hallmark Cards, Inc.

• Decision Date: 10 July 1969
• Docket Number: No. 68 Civ. 4132.,68 Civ. 4132.
• Citation: 301 F. Supp. 703
• Parties: TOP-ALL VARIETIES, INC., Plaintiff, v. HALLMARK CARDS, INC. and Tarrytown Stationers, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

301 F. Supp. 703

TOP-ALL VARIETIES, INC., Plaintiff, v. HALLMARK CARDS, INC. and Tarrytown Stationers, Inc., Defendants.

No. 68 Civ. 4132.

United States District Court S. D. New York.

July 10, 1969.

David Harrison Storper, New York City, for plaintiff.

Hughes, Hubbard & Reed, New York City, for defendants, Amalya L. Kearse, New York City, of counsel.

OPINION

FREDERICK VAN PELT BRYAN, District Judge:

Defendants, Hallmark Cards, Inc. (Hallmark) and Tarrytown Stationers, Inc. (Stationers) move pursuant to Rule 12(b) (6) F.R.C.P. to dismiss the complaint for failure to state a claim upon which relief can be granted. Defendants have not answered and the motion is addressed to the face of the complaint.

The complaint, laid under the Sherman and Clayton Acts, 15 U.S.C. § 1 et seq., in substance alleges the following:

Plaintiff, Top-All Varieties, Inc. (Top-All) is in the business of leasing, equipping, stocking and franchising retail stores under the trade name "Big Top" for the sale of greeting cards, stationery, toys and related merchandise in New York, New Jersey and Connecticut. Defendant, Hallmark, is the largest manufacturer of greeting cards in the United States. Defendant, Stationers, operates a retail store in Tarrytown, New York for the sale of greeting cards, stationery, toys and related merchandise and is supplied with greeting cards by Hallmark.

Hallmark's cards are recognized as the leading brand in the United States and have wide customer acceptance. There are, however, other manufacturers of greeting cards and there is no suggestion that full lines of such cards are not freely available. Hallmark has supplied its line of greeting cards to franchised Big Top stores and the line has been a significant factor in attracting customers.

Top-All is about to open a new franchised store in Tarrytown. Hallmark has refused to supply its greeting card line to that store. It is alleged that Hallmark's refusal to do so stems from an agreement between Hallmark and Stationers providing that Stationers will continue to purchase the Hallmark line upon condition that Hallmark will not supply the line to the new Big Top store in Tarrytown.¹ Apparently, the theory is that Hallmark has an exclusive dealership arrangement with Stationers which makes Stationers the sole Hallmark dealer in the Tarrytown area. This course of conduct is alleged to violate the Sherman Act and Top-All seeks treble damages and injunctive relief against continued violation.

It is plain that an agreement between a manufacturer and a distributor setting up an exclusive territorial distributorship does not in itself violate the Sherman Act. See Packard Motor Car Co. v. Webster Motor Car Co., 100 U.S. App. D.C. 161, 243 F.2d 418 (1957); Schwing Motor Co. v. Hudson Sales Corp., 239 F.2d 176 (4th Cir.1956); Potter's Photographic Applications Co. v. Ealing Corp., 1968 Trade Reg.Rep. ¶ 72,622 (E.D.N.Y.1968); Peerless Dental Supply Co. v. Weber Dental Manufacturing Co., 283 F.Supp. 288 (E.D.Pa.1968). As the Supreme Court has recently said:

"* * * A manufacturer of a product, other and equivalent brands of which are readily available in the market, may select his customers, and for this purpose he may `franchise' certain dealers to whom, alone, he will sell his goods. Cf. United States v. Colgate & Co., 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992 (1919). If the restraint stops at that point — if nothing more is involved than vertical `confinement' of the manufacturer's own sales of the merchandise to selected dealers, and if competitive products are readily available to others, the restriction, on these facts alone, would not violate the Sherman Act." United States v. Arnold, Schwinn & Co., 388 U.S. 365, 376, 87 S.Ct. 1856, 18 L.Ed. 2d 1249 (1967).

The complaint in the case at bar does not go any farther than this. It simply alleges an agreement between a manufacturer and distributor allocating a specific limited territory exclusively to the distributor with competitive products readily available to others.

There are cases where arrangements going beyond a simple exclusive distributorship arrangement may violate the Sherman Act. For example, where competitors of the exclusive distributor are excluded from effective competition because "other and equivalent brands * * * of goods are not readily available in the market." (United States v. Arnold, Schwinn & Co., supra, p. 376, 87 S.Ct., p. 1864) the effect on...