Jimmy T. Smith, an Individual and Smith Sales Co., a Corporation v. Scrivner-Boogaart, Inc., a Corporation

447 F.2d 1014
CourtCourt of Appeals for the Tenth Circuit
DecidedOctober 22, 1971
Docket322-70_1
StatusPublished
Cited by2 cases

This text of 447 F.2d 1014 (Jimmy T. Smith, an Individual and Smith Sales Co., a Corporation v. Scrivner-Boogaart, Inc., a Corporation) is published on Counsel Stack Legal Research, covering Court of Appeals for the Tenth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Jimmy T. Smith, an Individual and Smith Sales Co., a Corporation v. Scrivner-Boogaart, Inc., a Corporation, 447 F.2d 1014 (10th Cir. 1971).

Opinion

CLARK, Associate Justice.

This appeal seeks to overturn a jury verdict in an antitrust suit involving alleged violations of Section 1 of the Sherman Act and Sections 3 and 16 of the Clayton Act. Specifically, Jimmy T. Smith and Smith Sales Company, a corporation, appellants, wholesalers of automotive accessories, chemicals, etc. claim that Scrivner-Boogaart, Inc., a corporation, appellee, a wholesale-retail grocer and manufacturer is guilty of a per se violation of the antitrust laws in that it exacted agreements from appellants requiring them to purchase so much of appellants’ merchandise requirements for re-sale as shall equal in dollar volume 65 percent of their monthly sales; that, in any event, the agreements were an unreasonable restraint of trade or commerce under § 1 of the Sherman Act; that the form of the verdict as submitted to the jury was erroneous in that it called solely for the legal conclusion of the jury as to whether appellee violated the antitrust laws of the United States; and, finally, that the rulings of the trial judge excluding certain evidence as to damages were erroneous and his refusal to instruct that the agreements were a per se violation of the antitrust laws was invalid. We have carefully studied the entire record and have been unable to find support for appellants’ claims as to violations of the antitrust laws and therefore affirm the judgment without reaching the issue of damages.

I.

Background of the Parties and the Market:

The appellants began business in 1965 in Oklahoma in the wholesaling of a line of about 400 items of automotive accessories, automobile additives, chemicals, major brands of motor oil, oil filters, tools, charcoal, charcoal lighters and sunglasses. Appellants serviced the Tulsa area, primarily, with some sales in Picher and Oklahoma City, Oklahoma. Their customers included service stations, automobile garages, discount houses and retail grocery concerns. The latter made up 65 percent to 75 percent of their total sales, which in 1966 were $119,000, but by 1969 had reached $447,000 with gross profits of $56,519. Appellant’s largest customer was Warehouse Markets, a chain of 15 stores, with gross purchases from appellants of $226,650 in 1969. Red Bud Stores was their number two customer with $23,017 in 1969 although the appellee was its primary supplier. Appellants contend that this wide disparity in its sales to Warehouse Markets and Red Bud is due to an illegal tying and exclusive dealing arrangement between Red Bud and ap-pellee. However, Red Bud only stocked 1 percent of their total inventory in the automotive and accessory line.

The appellee is an integrated manufacturing and wholesale-retail concern that handles some 8000 items in the grocery and affiliated lines. Fourteen of these are in the automobile accessory line which is in competition with appellants. While the record does not show the amount of sales of appellee in the automobile accessory line, we do know that its total sales in all 8000 items approximates $110,000,000 annually to some 120 stores in Oklahoma, Texas, Arkansas, Nebraska and South Dakota. Some $60 million of this total is sold in Oklahoma. The relevant market in which appellant operates is Tulsa and its vicinity where there are over 400 retail grocery establishments, out of which the appellee serves ten. The appellee services most of its customers in the usual wholesale-retail manner; however it serves 25 of its outlets in Oklahoma under a sub-lease agreement. Four of these are in the Tulsa area where the *1016 appellee also owns 4 stores either in whole or in part and serves two other stores in the traditional manner.

II.

The Sub-Lease Agreements:

These contracts are in the customary-form for leases of retail stores premises. However the form includes a standard clause 1 that requires the retailer to purchase from the appellee 65 percent of the retailer’s total monthly net sales and to participate in certain dealer services rendered by appellee. When the usual 20 percent mark up on groceries and the necessity for goods other than those sold by appellee are considered the effect of this requirement is that a sub-lessee is forced to purchase about 80 percent of his requirements from appellee.

In addition, the required services include a complete accounting system, an advertising program, central billing and store remittance services, etc. furnished by appellee at additional fees. Under the advertising program the independent retail managers of the sub-lessee stores meet at regular intervals to agree on what items will be placed in media advertising and the price that will be charged for each item.

Appellants contend that the appellee is able to exact these restrictive terms from sub-lessees by agreeing to finance the opening of new stores, contracting for fixtures, furnishing a line of credit, providing the initial stocking of merchandise and making premises available, all on a reimbursable basis. While there are other wholesale grocers who perform similar services to consenting retailers frequently the merchant is unable to obtain financing without such terms. In the event a sub-lessee fails to perform the conditions of the lease the appellee then cancels it and forecloses. The record indicates one such instance being so handled. Another witness testified that she had been required to abide by the sub-lease requirements.

Appellant claims damages of $10,000 for loss of profits that they would have enjoyed from sales to appellee’s sub-lessees but for the violations of the antitrust laws. They also claim specific damage of $884.01 which is the balance due them on an open account by a sub-lessee of appellee whom the latter had foreclosed and forced into insolvency. The jury returned a verdict for the ap-pellee.

III.

Appellant’s Contentions:

1. Appellant says that the sublease arrangement of the appellees is a per se violation of Section 1 of the Sherman Act under the rule of Fortner Enterprises, Inc. v. United States Steel Corporation, 394 U.S. 495, 89 S.Ct. 1252, 22 L.Ed.2d 495 (1969) and cases there cited. The Supreme Court has held that tying arrangements — the sale of one product conditioned upon the purchase of another- — are illegal and that violations are per se provided a market leverage or control is present in the tying product and the market foreclosed is not de minimis. In Fortner, supra, the Court held that financial arrangements such as cash, credit, etc. may be the tying product and that sufficient dominance or economic control was present in *1017 the tying product even though it was effective “only with respect to some of the buyers” in the tied product. Here the appellant claims that the lease, financing, stocking of goods, etc. was the tying product and that the 65 percent requirement together with the services were the tied one. The jury, however, found that the appellant did not meet the burden of his ease under Fortner, i. e., neither the dominance nor control was present nor the effect de minimis.

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Bluebook (online)
447 F.2d 1014, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jimmy-t-smith-an-individual-and-smith-sales-co-a-corporation-v-ca10-1971.