Arthur Murray, Inc. v. Reserve Plan, Inc., Educational Credit Bureau, Inc. And Tuition Plan, Inc. v. Reserve Plan, Inc.

406 F.2d 1138
CourtCourt of Appeals for the Eighth Circuit
DecidedMarch 13, 1969
Docket18970, 18971
StatusPublished
Cited by22 cases

This text of 406 F.2d 1138 (Arthur Murray, Inc. v. Reserve Plan, Inc., Educational Credit Bureau, Inc. And Tuition Plan, Inc. v. Reserve Plan, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Arthur Murray, Inc. v. Reserve Plan, Inc., Educational Credit Bureau, Inc. And Tuition Plan, Inc. v. Reserve Plan, Inc., 406 F.2d 1138 (8th Cir. 1969).

Opinion

MEHAFFY, Circuit Judge.

This is a private antitrust suit brought under §§ 1 and 2 of the Sherman Act seeking treble damages under § 4 of the Clayton Act. 1 The parties waived a jury trial and the case was tried to the District Court for the Western District of Missouri. Plaintiff-appellee, Reserve Plan, Inc., was awarded treble damages in the amount of $697,500.00, plus costs, and an attorneys’ fee of $40,000.00. After submission here, Reserve Plan moved for an additional attorneys’ fee of $21,-300.00.

For clarity, Reserve Plan, Inc. will hereafter be referred to as plaintiff. Defendants Arthur Murray, Inc., Educational Credit Bureau, Inc. and Tuition Plan, Inc. will be referred to collectively as defendants and individually as AMI, ECB and TPI, respectively. Plaintiff and ECB and TPI are finance companies. AMI is engaged in franchising Arthur Murray Dance Studios throughout this country and abroad, and in 1955 and 1956 had franchise agreements with some 325 to 350 studios in the United States. These studios will be sometimes referred to herein as licensees. Under terms of the franchise agreements, the licensees pay royalties to AMI, which usually amount to approximately 10% of the gross receipts of each studio, for the use of the Arthur Murray name and method of teaching dancing.

On March 28, 1956, AMI issued a release to all of its studios restricting the financing of loans for dance lessons sold by its franchised studios to three finance companies — the defendants TPI and ECB (of Kansas City) and a third company ECB of New York, which latter company was dissolved prior to this suit and the stock acquired by defendant ECB of Kansas City. 2 All three of the aforementioned finance companies were sponsored by AMI, which loaned the companies capital and whose officials assisted in the corporate organization. The stockholders of AMI and the three finance companies were composed of people from the same groups — -members of the Murray family, officers and em *1141 ployees of the companies and their families, and Arthur Murray licensees. 3 Plaintiff was one of twenty-seven independent finance companies and banks doing business with the AMI licensees on the date of the March 28, 1956 release. By April of 1956, plaintiff had lost all of the Arthur Murray business with the exception of two accounts, one in Jackson, Mississippi and the other in Waco, Texas, which were later lost.

Broadly stated, the issues here are (1) the liability of the defendants and (2) the alleged excessiveness of the damages as computed by the district court.

We agree with the district court’s conclusion as to defendants’ liability and also agree with the method utilized by the district court in computing damages, but we think the district court erred in failing to include in plaintiff’s expenses any part of the executive salary in its handling of the AMI business which we think should have been considered and added to plaintiff’s expenses in order to properly compute the amount of damages. We also note what appears on the surface, at least, to be a failure on the part of the district court, in computing the income which plaintiff lost from AMI accounts during the three-year, ten-month period for which it was awarded damages, to take into consideration the record evidence concerning the deferred discount income which plaintiff received from AMI accounts during this period. For these reasons, we vacate the judgment entered in the district court and remand the case for recomputation of the damages to be awarded.

This case, a complex one, has had a thorny history since its inception. It was nearly four years after the suit was filed before the case finally came to trial on January 7, 1964. Thereafter, in a memorandum opinion issued on July 21, 1965 in a case styled Reserve Plan, Inc. v. Arthur Murray, Inc., 38 F.R.D. 23 (1965), Judge Oliver held that the defendants had violated the Sherman Act as charged and were liable to plaintiff for treble damages, but did not fix the amount of the damages. The court stated that in order to arrive at a reasonably accurate amount of damages, it would be necessary for the case to be referred to a master who was an accountant, with directions to receive particular accounting evidence and make an appropriate report which would enable the court to render a just verdict. Defendants petitioned this court for a writ of mandamus or prohibition to prohibit the district court from carrying out its order to appoint a special master to examine not only the evidence adduced by the parties at the trial but in addition to engage in a scrutiny of other indicated material, consisting of “ ‘all accounting records, income tax returns, balance sheets, contract documents, business and accounting correspondence and the like’, which could be reflective of the profits derived by defendants Educational Credit Bureau, Inc., and Tuition. Plan, Inc., from the business which plaintiff had been de *1142 prived of, involving some 45 accounts.” Arthur Murray, Inc. v. Oliver, 364 F.2d 28, 30 (8th Cir. 1966). In the opinion of this court in Arthur Murray, Inc. v. Oliver, supra, we held that the district court had the authority under the Federal Rules of Civil Procedure to refer the case to a special master to make an accounting analysis, even though the trial had been concluded and the case submitted to the court for its determination, but that the court could not engage in a prospecting quest for other evidence to add to the record nor appoint a master to do so unless such evidence should appear to be important as a matter of preventing injustice and, also, reasonably available. We held that under the particular factual situation involved, the reference should not be permitted to stand except as to the auditing of the plaintiff’s books and records. Therefore, the petition for the writ prohibiting reference to the master for auditing the books was denied, and as to the other aspects of the reference the district court’s order was directed to be vacated.

On September 12, 1966, Judge Oliver issued his modified order of reference to a master wherein he referred to the master the plaintiff’s audit records and income tax returns with directions that the master report as to whether from these records he could make a reasonably accurate calculation of the profits earned by plaintiff on its Arthur Murray studio business in the years prior to April 1, 1956. Thereafter, the master filed his report with the district court stating that it was impossible for him to calculate a reasonably accurate profit earned on the Arthur Murray business. This, however, can be readily understood in view of the fact that in the operation of plaintiff’s business it did not segregate the expenses which it incurred in handling the Arthur Murray accounts from its expenses on other accounts, and there was no reason why it should do this in order to keep a proper set of books. This, however, precluded a certified public accountant from stating with precise definiteness the exact amount of profits which plaintiff realized from the Arthur Murray accounts.

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Bluebook (online)
406 F.2d 1138, Counsel Stack Legal Research, https://law.counselstack.com/opinion/arthur-murray-inc-v-reserve-plan-inc-educational-credit-bureau-inc-ca8-1969.