Summary
In Package Closure Corp. v. Sealright Co., 141 F.2d 972, 979-980 (2 Cir. 1944), the Court of Appeals affirmed the district court's refusal to equate mere offers to discriminate with actual price discrimination.
Summary of this case from Aluminum Company of America v. TandetOpinion
No. 273.
April 3, 1944.
Appeal from the District Court of the United States for the Southern District of New York.
Action by the Package Closure Corporation against the Sealright Company, Inc., and others. Plaintiff's first cause of action was for violation of the Sherman Anti-Trust Act, and its second and third causes were for violation of the Clayton Act. From a judgment dismissing its amended complaint, plaintiff appeals.
Reversed and remanded as to first cause of action; affirmed as to second and third causes.
Plaintiff's complaint alleges the following "first cause of action" for treble damages resulting from a violation of the Sherman Act:
This appeal involves a second amended complaint. Plaintiff's original and its first amended complaint had previously been held insufficient by the lower court.
In connection with the bottling of milk, a circular disc known as a "cap" is inserted in the mouth or neck of the bottle to prevent the spilling of the contents. In many instances, the dairies, in addition to the cap, place a sanitary closure around the lip of the bottle extending about one-half inch below the top thereof to prevent contamination. This closure is known as a "hood." The dairies themselves affix the caps and hoods to the milk bottles by means of machines called "cappers" and "hooders" which they lease from the manufacturers of the caps and hoods. The four corporate defendants manufactured and sold (or leased) hoods, hooders, caps and cappers. They and six other manufacturers of hoods and hooders were members of the defendant unincorporated association, National Association of Sanitary Milk Bottle Closure Manufacturers, referred to in the complaint as the "Hood Association." These ten corporations constituted all of the manufacturers of hoods and hooders in the United States with the exception of the plaintiff.
In 1937 plaintiff was organized for the purpose of manufacturing hoods and hooders. After three years devoted to the developing of hoods, hood-making machinery and hooders requiring an investment and expenditure of $150,000, plaintiff succeeded in developing and manufacturing hoods and hooders with many new features, and had become an actual and potentially substantial competitor of the corporate defendants and the other members of the Hood Association, and threatened to terminate their monopoly in hoods and hooders.
In an effort to drive plaintiff out of business and thus remove the threat to their continued monopoly in the manufacture of hoods and hooders, the members of the Hood Association and the members of the defendant unincorporated association, The Milk Cap Statistical Bureau, referred to in the complaint as the "Cap Bureau" (consisting of eleven manufacturers of caps and cappers who sold 75% of all the caps in the United States and including all but one of the corporate defendants) entered into a conspiracy, pursuant to which, in order to induce dairies not to buy from plaintiff, the members of the Hood Association and Cap Bureau initiated the practice of fixing combination prices for caps and hoods together and sold them to dairies at such combination prices. "Pursuant to in furtherance of and to effect the objects of said combination and conspiracy, the defendants and the other members of the Cap Bureau and Hood Association acting in concert, agreed to and did with reference to caps and hoods sold by the corporate defendants and other members of the Cap Bureau and Hood Association: (a) Fix and maintain the price of caps and hoods when sold in combination with each other. (b) Fix and maintain the price of caps and hoods when sold in combination with each other at a combination price so low as not to permit a return to them covering the reasonable expense of production and sale and a reasonable profit thereon. (c) Fix and maintain the total price of caps and hoods when sold in combination at a price lower by from $.20 to $.28 per thousand units, each unit consisting of one cap and one hood, than when said units of caps and hoods of the same grade and quality were sold separately and not in combination. (d) Offer a price saving to purchasers of caps and hoods in combination which price saving was not based upon any economies in the cost of production or distribution effected through the sales of caps and hoods in combination. (e) Cause those dairies which purchased caps separately and not in combination with hoods from the corporate defendants and other members of the Cap Bureau and Hood Association either directly or through jobbers to forfeit and forego said price saving. (f) Fix and maintain the price of caps when sold independently of hoods at the same level at which caps of the same grade and quality were and are sold throughout the United States by non-members of the Cap Bureau and Hood Association. (g) Fix and maintain the selling price of hoods when sold independently of caps, at the same level at which such hoods of the same grade and quality were sold by plaintiff. (h) Cause statements to be made by their agents and representatives to customers and prospective customers of plaintiff that plaintiff's products were inferior in quality; that the use thereof constituted an infringement of patents of others and would subject the users to litigation and financial loss by reason of such infringements and that plaintiff was without adequate resources to continue to do business and would be in business only a short time. These statements were false and all except the last were known to the defendants and other members of the Cap Bureau and Hood Association to be false. All of these statements tended to weaken and injure the plaintiff in its business. Prior to the inception of said combination and conspiracy and the commission of the acts pursuant thereto, the corporate defendants and other members of the Cap Bureau and Hood Association never sold or offered for sale caps in combination with hoods."
Before the initiation of combination prices in 1940, the members of the Hood Association bought up any concerns which attempted to manufacture hoods and hooders and the patents relating thereto, scrapped their organizations and machinery or combined their plants and organizations with their own.
The conspirators knew that a dairy must have caps, because only the cap can prevent the spilling of milk from the bottle. The corporate defendants maintained uniform prices and monopolized the hood industry, in part through the instrumentality of the Hood Association and Cap Bureau, in that through them the corporate defendants fixed and maintained minimum and uniform prices, discounts, contract terms and other conditions for the sale and distribution of caps and hoods. The Hood Association and Cap Bureau rated and classified the 50,000 dairies located throughout the United States according to the number of hoods and caps used annually by the dairies. The ratings and classifications were distributed among the manufacturers who agreed to adhere and did adhere to said ratings in determining prices and discounts at which they should sell to the dairies. To make more effective the operation and carrying out of said agreements and combinations, the manufacturers filed with the Hood Association and the Cap Bureau price lists, copies of invoices containing the names of purchasers, quantities purchased and prices paid therefor, customers' lists and copies of contracts and conditions of sale. These data filed by the manufacturers were checked by the Hood Association and Cap Bureau, in accordance with their policy and practice to police the industry and thus to determine whether the manufacturers observed and carried out the agreements made by them. "Neither plaintiff nor its customers or prospective customers were able to purchase caps alone from any source at a price below that offered by the corporate defendants and other members of the Cap Bureau and Hood Association for caps not sold in combination with hoods. As a result of said combination and conspiracy and the acts committed in pursuance thereof, customers and prospective customers of plaintiff were faced with the alternatives of buying hoods from plaintiff and caps from others including the corporate defendants at a financial loss or of refusing to buy hoods from plaintiff so that they could purchase either directly or through jobbers, caps and hoods in combination from the corporate defendants and other members of the Cap Bureau and Hood Association at a financial saving. Plaintiff was unable to manufacture caps and cappers for the purpose of selling caps in combination with hoods because it did not have the requisite financial resources. As a result of said combination and conspiracy and the acts committed in pursuance thereof, the prospective customers of plaintiff refused to purchase hoods or lease hooders from it. As a result of said combination and conspiracy and the acts committed in pursuance thereof, plaintiff was unable to increase its business beyond that arising from the leasing of hooders and sale of hoods to" a "few dairies, the revenue from which business was insufficient to allow the continuation by plaintiff of its manufacture of hoods, hood-making machinery and hooders. As a result of said combination and conspiracy and the acts committed in pursuance thereof, the resources of plaintiff were exhausted and it had to close out its business removing plaintiff as an actual and a potential competitor of the corporate defendants and the other members of the Hood Association."
The Hood Association operated through a Manager, who is also Secretary and Treasurer, an Executive Committee and a Chairman, who is a member of the Executive Committee. Said Executive Committee consists of defendant Daniel A. Mackin, President of American Seal-Kap Corporation; defendant Harvey M. Smith, President of defendant Smith-Lee Company, Inc., and defendant Jarvis Williams, Jr., President of defendant Standard Cap Seal Corporation. Defendant Stanley Dennis is Chairman, and defendant George J. Lincoln, Jr., is Manager of the Hood Association.
"The aforesaid designing, development and construction by plaintiff of hoods, machines to make hoods and hooders was a tedious and laborious process. Plaintiff, beginning in 1937, invested and spent $150,000 for its development work. In addition, plaintiff's officers in connection therewith at the plaintiff's request, rendered services to the plaintiff of the reasonable value of $25,000 a year for three years. These services have not been paid for by the plaintiff. Plaintiff had manufactured additional hooders which it was unable to lease as a result of said combination and conspiracy and the acts committed in pursuance thereof. Although plaintiff had the facilities to increase its production of hoods and hooders and to sell and lease them to dairies at a profit, it was unable to avail itself of these facilities because of the aforesaid combination and conspiracy and the acts committed in pursuance thereof. Based on plaintiff's business experience in and after 1937, its profits for the three years beginning with 1941 would have amounted to at least $275,000. As a result of said combination and conspiracy and the acts committed in pursuance thereof causing the plaintiff to discontinue its business as aforesaid, plaintiff has been damaged in the sum of $500,000."
The complaint alleges a "second cause of action" for treble damages for violation of the Clayton Act, 38 Stat. 731, as amended, which, repeating most of the allegations of the "first cause of action," also alleges: "After the plaintiff had organized its business, the corporate defendants and the other members of the Cap Bureau and the Hood Association, sold and offered to sell (either directly or through jobbers) to dairies, including the customers and prospective customers of plaintiff, caps and hoods in combination with each other at a combination price so low as not to permit a return covering the reasonable expense of production and sale and a reasonable profit thereon. This combination price was lower by from $.20 to $.28 per thousand units, each unit consisting of one cap and one hood, than when said units of caps and hoods of the same grade and quality were sold separately and not in combination. The corporate defendants and the other members of the Cap Bureau and the Hood Association offered (either directly or through jobbers) a price saving to dairies, including the customers and prospective customers of plaintiff, on the purchase of caps and hoods in combination as against the purchase of caps and hoods of the same grade and quality, independently of each other. This price saving was not based upon any differences in the cost of manufacture, sale or delivery resulting from the sale of caps and hoods in combination or the quantities in which said caps and hoods in combination were to be sold or delivered. As was well known to the defendants and other members of the Cap Bureau and Hood Association, said combination price and price saving was available only to those dairies which purchased hoods from the corporate defendants and other members of the Cap Bureau and Hood Association and was not available to the dairies which purchased hoods and leased hooders from plaintiff. The offer of said combination price and price saving by the corporate defendants and other members of the Cap Bureau and Hood Association constituted an unlawful discrimination as to price between dairies which purchased hoods from plaintiff and dairies which either directly or through jobbers, purchased hoods from the corporate defendants and other members of the Cap Bureau and Hood Association. The dairies which purchased hoods from plaintiff as well as the prospective customers of plaintiff were in competition with the dairies which either directly or through jobbers, purchased hoods from the corporate defendants and other members of the Cap Bureau and Hood Association * * * Prior to said discriminations, the corporate defendants and other members of the Cap Bureau and Hood Association never sold or offered for sale caps in combination with hoods. As a result of said discriminations — (a) Plaintiff was unable to offer caps and hoods to its customers and prospective customers at the same saving that could be effected by them through the purchase (either directly or through jobbers) of caps and hoods of the same grade and quality in combination from the corporate defendants and the other members of the Cap Bureau and Hood Association. (b) Customers and prospective customers of plaintiff were faced with the alternatives of buying hoods from plaintiff and caps from others including the corporate defendants at a financial loss or of refusing to buy hoods from plaintiff so that they could purchase caps and hoods in combination at a financial saving (either directly or through jobbers) from the corporate defendants and other members of the Cap Bureau and Hood Association. (c) Prospective customers of plaintiff refused to purchase hoods or lease hooders from it * * * Said price discriminations were violative of the Clayton Act as amended, in that they substantially lessened competition in the sale of hoods between the plaintiff and the corporate defendants as well as the other members of the Hood Association and restored the monopoly theretofore enjoyed in the sale of hoods by the corporate defendants and the other members of the Hood Association. Said price discriminations were violative of the Clayton Act as amended, in that they destroyed competition in the sale of hoods between plaintiff and the corporate defendants as well as the other members of the Hood Association."
For a "third cause of action," the complaint alleges substantially the same facts as those set forth in the "second," plus allegations of a conspiracy to violate the Clayton Act.
The defendants other than appellees were not served and did not enter appearances. On motions of the defendants-appellees, made before they filed answers, the lower court entered a judgment dismissing the complaint without leave to amend. From that judgment plaintiff brings this appeal.
Unger Pollack, of New York City (William F. Unger, of New York City, of counsel), for appellant.
Sullivan Cromwell and Henry R. Ashton, all of New York City, Hiscock, Cowie, Bruce, Lee Mawhinney, of Syracuse, N.Y., and Joseph J. Brown, of Philadelphia, Pa., for appellees.
Edwards Smith, of New York City (John F. Dailey, Jr., and Charles A. Ellis, both of New York City, of counsel), for defendant-appellee Daniel A. Mackin.
Before CHASE, CLARK, and FRANK, Circuit Judges.
1. Without doubt, plaintiff alleges conduct by defendants violative of the Sherman Act. But that is not enough upon which to ground an action under § 7, 15 U.S.C.A. § 15. The question is whether plaintiff's allegations sufficiently show that, "by reason of" that conduct, plaintiff was "injured" and thereby "sustained damages."
The gist of the prolix complaint, and in fact the only ground of recovery by plaintiff under the Sherman Act, consists of allegations that, in aid of a conspiracy the purpose of which was to destroy plaintiff as a business rival, defendants, acting in concert, fixed a combination price at which they sold hoods and caps "so low as not to permit a return to them covering the reasonable expense of production and sale and a reasonable profit thereon"; that this price "was not based upon any economies in the cost of production or distribution effected through the sales of caps and hoods in combination"; that plaintiff could not compete in those circumstances; and that, as a consequence, it suffered damages. Defendants contend that these allegations disclose no causal relation between their acts and plaintiff's loss since plaintiff itself alleges its lack of "the requisite financial resources" to manufacture caps and cappers; that defendants' reduction in prices constituted no actionable wrong; and that, in any event, plaintiff's allegations of damages are insufficient. We cannot agree.
In Story Parchment Co. v. Paterson Co., 282 U.S. 555, 561, 51 S.Ct. 248, 250, 75 L. Ed. 544, a treble damage suit under the Sherman Act, the defendants, combining and conspiring in order to injure the plaintiff, sold their goods "below the point of fair profit, and finally below the cost of production." The Circuit Court of Appeals had reversed a judgment for plaintiff because it held that there was no basis for a reasonable inference that prices in excess of those actually realized would have prevailed if there had been no combination, and because the plaintiff was without capital to meet the situation confronting it even if there had been unrestrained competition, plaintiff's failure (so the court concluded) being inevitable either from lack of capital or inefficient management. 1 Cir., 37 F.2d 537. The Supreme Court reversed, saying: (282 U.S. pages 561, 562, 566, 567, 51 S.Ct. page 250, 75 L.Ed. 544); "There was evidence from which the jury reasonably could have found that, in pursuance of the conspiracy, respondents sold their goods below the point of fair profit, and finally below the cost of production; that petitioner had an efficient plant and sales organization, and was producing a quality of paper superior to that produced by either of the three companies; and that current prices, shown in detail, were higher during a period antedating the unlawful combination and price cutting in pursuance of it than afterward. It does not necessarily follow, of course, that these higher prices would have continued except for the conspiracy, but it is fair to say that the natural and probable effect of the combination and price cutting would be to destroy normal prices; and there was evidence of the prices received by petitioner before the cut prices were put into operation, and those received after, showing actual and substantial reductions, and evidence from which the probable amount of the loss could be approximated. The trial court fairly instructed the jury in substance that, if they were satisfied that the old prices were reasonable, and that they would not have changed by reason of any economic condition, but would have been maintained except for the unlawful acts of the respondents, the jury might consider as an element of damages the difference between the prices actually received and what would have been received but for the unlawful conspiracy. Upon a consideration of the evidence, we are of opinion that it was open to the jury to find that the price cutting and the resulting lower prices were directly attributable to the unlawful combination; and that the assumption indulged by the court below, that respondents' acts would have been the same if they had been acting independently of one another, with the same resulting curtailment of prices, must be rejected as unsound. * * * Disposing of the second item of damages, the court below, after referring to evidence tending to show that petitioner was not in a thriving financial condition, said that petitioner was without capital to meet the situation which it faced, even if there had been no conspiracy and there had been open competition; and that its failure was inevitable either from lack of capital or inefficient management or both. The court therefore concluded that petitioner had not sustained the burden of proving that the depreciation in value of its plant was due in any measurable degree to any violation of the Sherman Act by the respondents. But this conclusion rested upon inferences from facts within the exclusive province of the jury, and which could not be drawn by the court contrary to the verdict of the jury without usurping the functions of that fact finding body. Whether the unlawful acts of respondents or conditions apart from them constituted the proximate cause of the depreciation in value was a question, upon the evidence in this record, for the jury, `to be determined as a fact, in view of the circumstances of fact attending it.' Milwaukee St. Paul Ry. Co. v. Kellogg, 94 U.S. 469, 474, 24 L.Ed. 256."
That decision, we think, compels reversal here. True, here the plaintiff does not go so far as to allege sales "finally below the cost of production." But that difference is not sufficient to distinguish this case from Story Parchment. Plaintiff's allegations, if proved and unexplained, will show a conspiracy to drive plaintiff out of business by forbidden concerted action in fixing a price which had no reasonable economic foundation and the purpose of which was to injure plaintiff.
There plaintiff's complaint (as distinguished from the evidence at the subsequent trial) merely alleged that defendants "reduced prices * * * below a price which would yield a return to them * * * covering the reasonable cost of producing and selling vegetable parchment and a reasonable profit thereon * * *" As the case did not come before the Supreme Court on the pleadings, we do not regard the decision as explicitly and literally matching the case here. But the additional facts there proved on the trial are not, we think, of significance.
Of course, if, without concert, the defendants had severally sold at a price injurious to plaintiff, their conduct would not have been actionable, for, ordinarily, one engaged in actual competition, may sell his products at such prices as he chooses regardless of the consequences to his competitors. Indeed, keen rivalry in the essence of that competition which the common law fosters and which the Sherman Act is designed to promote. Because of the assumed value of competition — to consumers and also as a stimulant of enterprising characteristics, regarded as desirable, in the competitors themselves — the common law recognizes a privilege (which the Sherman Act underscores) to do acts, when engaged in competition, resulting in financial loss to others, although, in the absence of a competitive purpose, those same acts would give rise to legal liability. As Mr. Justice Holmes said, "A man has a right to set up a shop in a small village which can support but one of the kind, although he expects and intends to ruin a deserving widow who is established there already," this privilege resting "on the economic postulate that free competition is worth more to society than it costs." But that privilege, founded on the existence of a bona fide competitive purpose, vanishes at common law when the purpose is not competition in good faith. "Imposed legal duties are usually a compromise between conflicting interests, the aggressor being privileged to invade the victim's interest to protect his own, so far as the law recognizes it. Hence, when he is not actuated by the desire to protect a recognized interest, the basis for his excuse disappears." Much the same policy is embodied in § 7 of the Sherman Act. Accordingly, when persons aim not to compete but to eliminate competition, when, with that intent, they combine to fix prices so as to destroy a rival, and when their conduct has that effect, the injured rival may recover three times his resultant damages. It is defendants' price-fixing conspiracy for the illegal purpose and with the consequence alleged by plaintiff which gives plaintiff here a good claim under the Act.
Holmes, Privilege, Malice and Intent, 8 Harv.L.Rev. (1894) 1, 3; Holmes, Collected Legal Papers (1920) 117, 121; Vegelahn v. Guntner, 1896, 167 Mass. 92, 44 N.E. 1079, 1080, 35 L.R.A. 722, 57 Am.St.Rep. 443. See Restatement of Torts, § 708; Eastern Wine Corp. v. Winslow-Warren, Ltd., 2 Cir., 137 F.2d 955, 958.
Restatement of Torts, § 700; Tuttle v. Buck, 107 Minn. 145, 119 N.W. 946, 22 L.R.A., N.S., 599, 131 Am.St.Rep. 446, 16 Ann.Cas. 807; Eastern Wine Corp. v. Winslow-Warren, Ltd., supra.
N.L.R.B. v. Columbia Products Corp., 2 Cir., 1944, 141 F.2d 687; cf. Ingo v. Koch, 2 Cir., 127 F.2d 667, 672, and notes 7, 8 and 9.
The lower court did not reach its decision by distinguishing the instant case from the Story Parchment case, but, in its opinion, said that in such a suit the plaintiff's allegations that defendants' violation of the Sherman Act was "the proximate cause" of the damages to the plaintiff "are jurisdictional," and that, "for that reason, legal conclusions are insufficient and facts must be pleaded with definiteness and particularity." Holding that plaintiff's allegations in that respect were "legal conclusions," it therefore decided that the complaint must be dismissed. In other words, it held that "jurisdictional" facts must be alleged with unusual particularity. We cannot agree.
Indeed, the court did not mention that case but leaned heavily on the earlier case of Keogh v. C. N.W. Ry. Co., 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183.
There is no doubt that, as federal jurisdiction in an action for treble damages is founded on the facts that the defendant violated the Act and that by reason of that violation the plaintiff has sustained damages, such facts are "jurisdictional." But so, too, is the existence of a claim for more than $3,000 in a suit based upon diversity of citizenship, or the plaintiff's ownership of a patent in a suit for patent infringement; yet such facts in such suits need not (especially under the new Rules) be alleged with any unusual "definiteness and particularity." It is urged by defendants that a stricter requirement as to a plaintiff's pleading in treble damage actions is necessary because of the expense often involved in such litigation. But in that respect such actions are not unique, for huge expense is involved, too, in many a patent infringement suit and in many a suit where jurisdiction rests on diversity of citizenship. To impose peculiarly stiff requirements in treble damage suits will be to frustate the Congressional intent. As Judge Lurton said some forty years ago: "Congress evidently foresaw the wholesome effect of pecuniary responsibility for injuries resulting from such forbidden combinations and the courts should not devitalize the remedy by strained interpretations calculated to encourage disregard of the law."
That suggestion is made in Arthur v. Kraft-Phenix Cheese Corp., D.C., 26 F. Supp. 824, 830.
City of Atlanta v. Chattanooga Foundry Pipeworks, 6 Cir., 127 F. 23, 27, 64 L.R.A. 721, affirmed sub nom. Chattanooga Foundry v. Atlanta, 203 U.S. 390, 27 S.Ct. 65, 51 L.Ed. 241; see Roseland v. Phister Mfg. Co., 7 Cir., 125 F.2d 417, 420, 139 A.L.R. 1013.
The Supreme Court, at least as early as 1931, manifested no hostility to treble damage suits under the Sherman Act (Story Parchment Co. v. Paterson Co., supra) and we observe no signs that in the intervening years it has become less friendly either to direct enforcement or indirect enforcement of that Act. We see no reason whatever to believe that the Supreme Court intended its liberal rules governing pleadings to be inapplicable to a suit for treble damages. See C.E. Stevens Co. v. Foster Kleiser, 311 U.S. 255, 260, 261, 61 S.Ct. 210, 85 L.Ed. 173. We conclude that plaintiff has made sufficient allegations of a causal relation between the violation of the Act and plaintiff's injury to entitle it to go to a jury. If the defendants, before trial, desire more detailed information from plaintiff, they can seek it by interrogatories, deposition or discovery.
See, e.g., United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129.
See, e.g., Sola Elec. Co. v. Jefferson Elec. Co., 317 U.S. 173, 63 S.Ct. 172, 87 L.Ed. 165; Morton Salt Co. v. Suppiger, 314 U.S. 488, 492, 62 S.Ct. 402, 86 L.Ed. 363; B.B. Chemical Co. v. Ellis, 314 U.S. 495, 62 S.Ct. 406, 86 L.Ed. 367.
See, e.g., Leimer v. State Mut. Life Assur. Co., 8 Cir., 108 F.2d 302, 305, 306; Sparks v. England, 8 Cir., 113 F.2d 579, 581, 582; Musteen v. Johnson, 8 Cir., 133 F.2d 106, 108; Maty v. Grasselli, Inc., 303 U.S. 197, 200, 201, 58 S.Ct. 507, 82 L.Ed. 745; Clark, Simplified Pleading, 2 F.R.D. 456.
Cf. Louisiana Farmers' Protective Union Co. v. Great A. P. Tea Co., 8 Cir., 131 F.2d 419, 422, 423.
The allegations concerning the individual defendants including appellee, Macklin, are sufficient.
They can also seek it under Rule 12(e) Rules of Civil Procedure, 28 U.S.C.A. following section 723c; but see 1 Moore, Federal Practice, 1942 Supplement, 634-650, for a searching criticism of the misuse of that Rule.
Those same comments apply to plaintiff's allegation of its damages. The complaint sufficiently alleges plaintiff's loss of its investment in its plant; and there is no insufficiency in the allegations as to loss of prospective profits. As the Supreme Court observed in Story Parchment, supra, when a wrongdoer is alone responsible for creating a condition in which damages cannot be measured with exactness and precision, he cannot complain. The court said: "Where the tort itself is of such a nature as to preclude the ascertainment of the amount of damages with certainty, it would be a perversion of fundamental principles of justice to deny all relief to the injured person, and thereby relieve the wrongdoer from making any amend for his acts. In such case, while the damages may not be determined by mere speculation or guess, it will be enough if the evidence show the extent of the damages as a matter of just and reasonable inference, although the result be only approximate. The wrongdoer is not entitled to complain that they cannot be measured with the exactness and precision that would be possible if the case, which he alone is responsible for making, were otherwise."
That doctrine finds its application in many differing contexts. Often, a failure to apply that doctrine would mean that the more grievous the wrong done to the plaintiff by the defendant, the less likelihood there would be of a recovery. In the Story Parchment case the court (282 U.S. at page 565, 51 S.Ct. at page 251, 75 L.Ed. 544) quoted with approval from Straus v. Victor Talking Machine Co., 2 Cir., 297 F. 791, 802, to the effect that "the constant tendency of the courts is to find come way in which damages can be awarded where a wrong has been done. Difficulty of ascertainment is no longer confused with right of recovery."
See, for instance, cases of confusion of goods such as Great Southern Gas Oil Co. v. Logan Natl. Gas Fuel Co., 6 Cir., 155 F. 114, 115, certiorari denied 207 U.S. 590, 28 S.Ct. 256, 52 L.Ed. 354. Compare the heavy burden of proof put on a ship in a collision case when it has violated a regulation made pursuant to statute; see The Pennsylvania, 19 Wall. 125, 136, 137, 22 L.Ed. 148, where the court said: "Such a rule is necessary to enforce * * * the mandate of the statute. * * * Who can say the proximity of the vessels would not have been discovered sooner if the bark had obeyed the navy regulation? If it be said this is speculation, it may be admitted, but it is speculation rendered necessary by [the] fault of the bark." Cf. F.W. Woolworth v. N.L.R.B., 2 Cir., 121 F.2d 658, 663.
See, also, Eastman Kodak Co. v. Southern Photo Co., 273 U.S. 359, 378, 47 S.Ct. 400, 71 L.Ed. 684; Palmer v. Connecticut Ry. Co., 311 U.S. 544, 559, 61 S.Ct. 379, 85 L.Ed. 336; Meeker v. Lehigh Valley R. Co., 2 Cir., 183 F. 548, 551, 552.
2. The court below — citing Shaw's, Inc. v. Wilson-Jones Co., 3 Cir., 105 F.2d 331 and Lipson v. Socony-Vacuum Corp., 1 Cir., 87 F.2d 265 — held that the complaint alleged no violation of § 2 of the Clayton Act as amended, 15 U.S.C.A. § 13, because it showed "no discrimination between different purchasers or that any purchases took place," and no "discrimination between purchasers of commodities of like grade and quality." Judge CHASE and Judge CLARK agree with that conclusion, on the ground that a discount on a combination sale is not a forbidden discrimination and that, in any event, no actual discriminatory sales are alleged.
It reads in part as follows: "It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them: Provided, That nothing contained in sections 12, 13, 14-21, 22-27 of this title shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered * * * And provided further, That nothing contained in sections 12, 13, 14-21, 22-27 of this title shall prevent persons engaged in selling goods, wares, or merchandise in commerce from selecting their own customers in bona fide transactions and not in restraint of trade: And provided further, That nothing contained in sections 12, 13, 14-21, 22-27 of this title shall prevent price changes from time to time where in response to changing conditions affecting the market for or the marketability of the goods concerned, such as but not limited to actual or imminent deterioration of perishable goods, obsolescence of seasonal goods, distress sales under court process, or sales in good faith in discontinuance of business in the goods concerned. * * * It shall be unlawful for any person engaged in commerce, in the course of such commerce, to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof, except for services rendered in connection with the sale or purchase of goods, wares, or merchandise, either to the other party to such transaction or to an agent, representative, or other intermediary therein where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect control, of any party to such transaction other than the person by whom such compensation is so granted or paid."
On that point, I differ with my colleagues for the following reasons: The complaint does, I think, allege that there were sales of caps to those who purchased them in combination with hoods at prices which discriminated against those who purchased caps only. In both instances, the same product, caps, were actually sold. The facts therefore distinguish this case from Shaw's, Inc. v. Wilson-Jones Co., supra, where the defendant refused to quote a price to plaintiff while quoting a price to plaintiff's competitor; there was no allegation of actual sales, and accordingly the court held there was no discrimination in price "between different purchasers." [105 F.2d 333.] In Lipson v. Socony Vacuum Corp., 1 Cir., 87 F.2d 265, the defendant made a differentiation between sales of gasoline in tank cars and sales in tank trucks or tank wagons; there the differentiation was based on a difference in the quantity of the product sold. Here the discrimination has no similar foundation. Since the defendants granted the so-called "discount" in order substantially to lessen competition, or to create a monopoly, and with that effect, I think they were guilty of a statutory violation by reason of which plaintiff was injured and sustained damages; for the statute covers a prevention or destruction of competition "with any person who * * * grants * * * such discrimination." It is not necessary that the plaintiff show that it was a purchaser against whom defendants discriminated. I think the issue should go to a jury.
Midland Oil Co. v. Sinclair Refining Co., D.C., 41 F. Supp. 436, 438.
Reversed and remanded as to first cause of action; affirmed as to second and third causes.