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WEBSTER MOTOR CAR CO. v. PACKARD MOTOR CAR CO.

October 25, 1955

The WEBSTER MOTOR CAR COMPANY et al., Plaintiffs,
v.
PACKARD MOTOR CAR COMPANY et al., Defendants



The opinion of the court was delivered by: HOLTZOFF

This case is before the court at this time on motions by the defendants for judgment notwithstanding the verdict or, in the alternative, for a new trial.

This action was brought to recover triple damages under the Antitrust laws. *fn1" The plaintiff was one of several dealers in Packard automobiles in Baltimore, Maryland, pursuant to a contract with the defendant Packard Motor Car Company. The plaintiff claims that as a result of a conspiracy between this defendant and a rival dealer, it was unlawfully deprived of its contract, and the competitor was made an exclusive dealer in Packard cars in the Baltimore area. After a trial on the merits the jury returned a verdict for the plaintiff for the sum of $ 190,000. Pursuant to the mandatory direction of the statute, the court ordered judgment to be entered for three times that amount, namely, $ 570,000. *fn2"

 The basic questions raised by the motion for judgment notwithstanding the verdict are: first, whether there was substantial evidence justifying the submission of the case to the jury on the issue of liability; and second, whether there is substantial evidence to sustain the verdict of the jury as to the amount of damages.

 It is an elementary rule that on such motions the evidence must be viewed from the standpoint most favorable to the prevailing party. *fn3" Some of the evidence introduced at the trial was conflicting. The jury would have been justified, however, in finding the following facts from the evidence adduced in behalf of the plaintiff.

 The defendant Packard Motor Car Company is a manufacturer of automobiles. It sells its product through dealers located at various points throughout the country. Every dealer operates under a contract with the defendant, sometimes known as a franchise. Such a contract runs for the period of one year, but the usual practice of the defendant is to renew it from year to year so long as the dealer's services are satisfactory. For a number of years there were four Packard dealers in Baltimore, Maryland, of whom the plaintiff, Webster Motor Car Company, was one. The plaintiff's contract was continued from year to year over a considerable period. In fact, when on one occasion the plaintiff's plant burned down as a result of a disastrous fire and the plaintiff had some doubt whether to rebuild or to go out of business, the defendant encouraged the plaintiff to pursue the former course and, in fact, assisted it in the preparation of architect's plans for reconstructing its building. It was reasonable to infer that under ordinary circumstances the plaintiff's contract would have been renewed from year to year as long as its services were satisfactory, and as long as it wished to remain in business as a dealer in Packard cars. In course of time, one of the four dealers in Baltimore, gave up its franchise. Consequently at the crucial period involved in this case, there were three Packard dealers in that city. They were the plaintiff, the Zell Motor Car Company, and DeBaugh Motors. The plaintiff continually operated at a profit, although the amount of the profit varied considerably from year to year.

 In the winter of 1952, Sidney Zell, the President of the Zell Motor Car Company, approached the defendant Packard Motor Car Company, and informed its officials that his company was operating at a loss and would not continue to sell Packard cars unless the defendant gave it an exclusive contract and eliminated all rival dealers. After some conferences among themselves, the Packard officials decided to agree to Zell's proposal and so informed him. In order to carry out this scheme, Packard representatives apprised DeBaugh that his franchise would not be continued. They also informed the plaintiff that its contract would not be renewed, without advancing any ground for this action. Richard Webster, the President of the plaintiff corporation, implored the defendant to reconsider, expressing his desire to continue as a Packard dealer, inquiring whether there was any dissatisfaction with his performance, and offering to make changes and improvements in any manner desired by Packard. The latter declined to give any reason whatsoever for its attitude, but remained adamant. When the plaintiff continued its protests, Packard finally offered to renew its franchise for one year. The plaintiff countered by requesting some assurance of good faith, as apparently it had become suspicious. Zell, on the other hand, secretly protested to Packard against its offer to renew the Webster franchise for one year, and the Packard officials in effect told him that this renewal would be the last to far as Webster was concerned, without, however, giving this information to Webster. The latter wound up its Packard business and tried to sell cars of a different make. Apparently it was not successful. The Webster Motor Car Company then discontinued business altogether. Its claim in this action is based on the contention that the arrangement between Packard and Zell constituted a conspiracy violative of the Antitrust Laws. The plaintiff sought to recover triple damages suffered as a result of being allegedly driven out of business in the manner above outlined.

 The principal question is whether the foregoing facts constitute a contract or conspiracy in unreasonable restraint of interstate commerce or a combination or conspiracy to monopolize any part of interstate commerce, or whether the defendant acted within its legal rights.

 Unquestionably, a business concern has a right to select its own customers. It has the privilege of selling its products to whomever it chooses, to refrain from dealing with any one, and to prefer one potential customer over another. Consequently, if the Packard Motor Car Company of its own initiative, for whatever reasons it deemed best, determined that thereafter there should be only one Packard dealer in Baltimore, who would receive an exclusive franchise, and that this dealer should be the Zell Motor Car Company, there would probably have been no violation of the antitrust laws. *fn4" That is not this case, however. The right to select one's customers is a right that may be exercised free from compulsion and without agreements with others that tend unreasonably to restrain interstate commerce or to create a monopoly. Such a choice may not legally result from an agreement or arrangement or conspiracy between two or more individuals, or two or more business concerns, to exclude others from the channels of trade, or to attempt to create a monopoly or substantial monopoly for one of the parties to the agreement. *fn5" The purpose of the antitrust laws is to keep the channels of competition open and free and to prevent their becoming blocked by agreements to force competitors from the field. If as a result of greater energy or efficiency, Zell had acquired a larger share of the business and the plaintiff had fallen by the wayside, the latter would not have had any basis for complaint. The law, however, does not countenance agreements to drive a competitor out of the market by artificial means. An agreement to exclude a rival is of an entirely different nature from free competition that may indeed at times result in economic death for one of the competitors.

 This line of demarkation was aptly drawn as follows by Judge Freed in G. & P. Amusement Co. v. Regent Theater Co., D.C.N.D.Ohio, 107 F.Supp. 453, 463, whose decision was affirmed by the Court of Appeals for the Sixth Circuit, 216 F.2d 749:

 'The opportunity of a business entity, when acting without ulterior motives and free from compulsion, to sell its product to one potential customer in preference to another, exemplifies precisely the type of economic system upon which American business thrives. This Court has never regarded the Sherman Act as an instrument requiring a dealer in commodities to sell to all comers, when to do so will be to run the risk of destroying a good customer by selling to another when it is simply an economic impossibility for both to exist -- provided, of course, that there is no wrongful use of monopoly power or conspiracy to restrain trade.' (Emphasis supplied.)

 The applicable rules of substantive law are found in the Sherman Act and read as follows:

 'Every contract, * * * or conspiracy, in restraint of trade or commerce among the several States, * * * is declared to be illegal: * * *.' *fn6"

 'Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, * * * shall be deemed guilty of a misdemeanor'. *fn7"

 It is well established that the first of the foregoing sections must be construed as though it read, 'Every contract or conspiracy in unreasonable restraint of trade or commerce, is declared to be illegal.' *fn8" The term 'conspiracy' is of course not to be interpreted as though it had ...


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