United States v. Bensinger Company

• Citation: 430 F.2d 584
• Decision Date: 18 August 1970
• Docket Number: No. 19771,19777.,19771
• Parties: UNITED STATES of America, Appellee, v. The BENSINGER COMPANY, Appellant. UNITED STATES of America, Appellee, v. The HOBART MANUFACTURING COMPANY, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

430 F.2d 584 (1970)

UNITED STATES of America, Appellee, v. The BENSINGER COMPANY, Appellant.

UNITED STATES of America, Appellee, v. The HOBART MANUFACTURING COMPANY, Appellant.

Nos. 19771, 19777.

United States Court of Appeals, Eighth Circuit.

June 30, 1970.

Rehearing Denied August 18, 1970.

COPYRIGHT MATERIAL OMITTED

Lon Hocker, of Hocker, Goodwin & MacGreevy, St. Louis, Mo., and John F. McClatchey, of Thompson, Hine & Flory, Cleveland, Ohio, for appellant, The Hobart Manufacturing Co.; George F. Karch, Jr., of Thompson, Hine & Flory, Cleveland, Ohio, on the brief.

Harold D. Carey, St. Louis, Mo., for appellant, The Bensinger Co.

James M. Gordon, Asst. U. S. Atty., St. Louis, Mo., for appellee; Daniel Bartlett, Jr., U. S. Atty., St. Louis, Mo., on the brief.

Before VAN OOSTERHOUT, Chief Judge, and MATTHES, and GIBSON, Circuit Judges.

GIBSON, Circuit Judge.

The Hobart Manufacturing Company and one of its St. Louis dealers, The Bensinger Company, were convicted of violating § 1 of the Sherman Act (15 U. S.C. § 1) by conspiring to fix the price of a dishwasher. A timely appeal was filed by both defendants. The facts constituting the alleged conspiracy are as follows.

Trader Vic's restaurant, located in the Bel Air East Motel in St. Louis, Missouri, decided to remodel its dishwashing facilities. Specifications for the remodeling called for the installation of a Hobart dishwasher, plus other equipment, and were prepared by The Bensinger Company. Upon receipt of the specifications, Trader Vic's sent out bid forms to The Bensinger Company, Almar Interior Design and Equipment Company, and Southern Equipment Company. All of these companies were Hobart dealers located in St. Louis. According to these original bid forms, the companies were to submit bids only for the cost and delivery of the equipment. The restaurant contemplated that its own personnel would handle the installation. Bids were received only from Bensinger and Almar; Bensinger was the low bidder.

Prior to receiving the above bids, the restaurant decided that the equipment supplier should also handle the installation. The first bids were rejected and new bid forms were sent out to the same three companies. The new bid forms required the companies to submit bids specifying the contract price of the equipment as well as costs of installation. Bids were received from Bensinger and Southern. Although Southern's bid on the cost of the dishwasher was the higher of the two, it was ultimately awarded the contract because its total bid was lower.

The alleged conspiracy for which defendants were convicted was a price-fixing agreement on the sale of the dishwasher in the first round of bidding. The testimony was conflicting at the trial, but according to the government's evidence, defendant Hobart's St. Louis dealer representative, Richard Grayless, who was named as a co-conspirator, contacted Almar's officers and told them Hobart would not allow Almar to underbid Bensinger for the job, the job belonged to Bensinger, if Almar bid it would be in danger of losing its Hobart franchise, and if it got the job Hobart would not deliver the machine. When Almar said it was going to submit a bid anyway, Grayless allegedly instructed it to contact Bensinger and find out its bid and then submit a noncompetitive bid. Grayless denied these threats and instructions, but admitted discussing the job with Almar and also admitted knowledge that Almar was going to send its bid to Bensinger to be forwarded to Trader Vic's. Conversations between Almar and Bensinger followed these discussions with Grayless, the contents of which are disputed, but it is uncontroverted that Almar did forward its bid to Bensinger, which saw it and sent it on to Trader Vic's. According to Bensinger, Almar was simply submitting a courtesy bid to Trader Vic's in order to preserve good relations.

Almar later lost its Hobart franchise and subsequently complained to the United States Attorney. This prosecution followed. Almar was named a co-conspirator, but was not named a defendant.

Appellants raise three issues on appeal. First, they contend that the jurisdictional requirement of interstate commerce was not met in this case and that the judge's instructions on the issue were in error. Second, they contend that the trial court's refusal to permit leading questions in cross-examination of one witness denied them their Sixth Amendment right of confrontation. Third, they object to the admission of certain evidence. We consider these contentions in order.

INTERSTATE COMMERCE

It is a jurisdictional requirement of the Sherman Act that the acts constituting the violation be "in restraint of trade or commerce among the several States." (15 U.S.C. § 1) In legal parlance, it is said that the restraint must be upon interstate commerce. Appellants contend that the conspiracy fixing the price of one dishwasher is so insignificant that it does not meet the jurisdictional test of interstate commerce. In considering this contention, we must summarize the law applicable to violations of § 1 of the Sherman Act.¹

For purposes of § 1 of the Sherman Act, conspiracies which are in restraint of trade may be divided into two categories: (1) those in which the activities complained of are wholly intrastate in character; and (2) those in which the activities occur in the course of interstate commerce. Las Vegas Merchant Plumbers Ass'n v. United States, 210 F.2d 732 (9th Cir. 1954), cert. denied, 348 U.S. 817, 75 S.Ct. 29, 99 L.Ed. 645 (1954); United States v. Pennsylvania Refuse Removal Ass'n, D. C., 242 F.Supp. 794 (1965), aff'd 357 F. 2d 806 (3d Cir. 1966), cert. denied, 384 U.S. 961, 86 S.Ct. 1588, 16 L.Ed.2d 674 (1966). Where the activities are of an intrastate character, in order for there to be a Sherman Act violation, it must be shown that the restraint directly and substantially affects interstate commerce. Lieberthal v. North Country Lanes, Inc., 332 F.2d 269 (2d Cir. 1964); Elizabeth Hospital, Inc. v. Richardson, 269 F.2d 167 (8th Cir. 1959), cert. denied 361 U.S. 884, 80 S.Ct. 155, 4 L.Ed.2d 120 (1959); Spears Free Clinic v. Cleere, 197 F.2d 125 (10th Cir. 1952); Prospect Dairy, Inc. v. Dellwood Dairy Co., 237 F.Supp. 176 (N.D.N.Y.1964).

Where the activities are interstate in nature, the interstate commerce issue depends upon whether the restraint is a per se violation of the Act, such as price fixing (United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129 (1940)) or division of markets (Addyston Pipe & Steel Co. v. United States, 175 U.S. 211, 20 S.Ct. 96, 44 L.Ed. 136 (1899)), or whether the restraint must meet the test of "unreasonableness" (Standard Oil Co. v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911)). Where there is a per se violation, the effect upon interstate commerce follows as a matter of law and is conclusively presumed. Las Vegas Merchant Plumbers Ass'n v. United States, supra. There need be no showing of the amount of commerce involved and it is no defense that the amount was small. United States v. McKesson & Robbins, Inc., 351 U.S. 305, 76 S.Ct. 937, 100 L.Ed. 1209 (1955); Las Vegas Merchant Plumbers Ass'n v. United States, supra; United States v. Pennsylvania Refuse Removal Ass'n, supra. Where the restraint is not a per se violation of the Act, but depends upon the reasonableness of the activity involved, the effect upon interstate commerce may be a question of law, a question of fact, or a mixed question of law and fact. Las Vegas Merchant Plumbers Ass'n v. United States, supra; compare Perryton Wholesale, Inc. v. Pioneer Distributing Company, 353 F.2d 618 (10th Cir. 1965), cert. denied, 383 U.S. 945, 86 S.Ct. 1202, 16 L. Ed.2d 208 (1965), with Ruddy Brook Clothes, Inc. v. British & Foreign Marine Ins. Co., Ltd., 195 F.2d 86 (7th Cir. 1952), cert. denied, 344 U.S. 816, 73 S. Ct. 10, 97 L.Ed. 635 (1952).

Therefore, the first question to be decided in this case is whether the conspiracy in question to fix prices was intrastate or interstate in character. Appellants contend that since the Hobart dealer representative was located in St. Louis, the franchised dealers were located in St. Louis, the buyer was in St. Louis, the agreement was entered into in St. Louis, and the dishwasher was to be installed in St. Louis, the conspiracy must be viewed as one wholly intrastate in character. We think this analysis of the transaction overlooks several significant aspects. It is true that the mere fact that a party engages in interstate commerce will not support a finding that a restraint of trade occurred in interstate commerce; the interstate commerce itself of that party must be involved. Lieberthal v. North Country Lanes, Inc., supra. But in this case, the interstate business of Hobart was directly involved in several ways. The machine which was the subject of the agreement was manufactured in Troy, Ohio, and it had to be delivered from there to St. Louis. The order from St. Louis had to be placed and accepted in Hobart's main office in Troy. Most significantly, one of the threats which led to the agreement was that if Almar got the contract Hobart would not deliver the machine. Thus, the conspirator Hobart was engaged in interstate commerce, its product which was the subject of the conspiracy moved in interstate commerce, and that movement in interstate commerce was directly threatened by the conspiracy. This is sufficient to establish that the conspiracy occurred in the course of interstate commerce. Since the conspiracy was not intrastate in character, the requirement of that theory that the effect on interstate commerce be direct and substantial is not applicable here.²

With an "in commerce" transaction, it must be determined whether the conspiracy was a per se violation of the act, which requires no further showing of an effect upon interstate commerce, or whether it was a restraint which must meet the test of unreasonableness. The agreement in...