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Klein v. American Luggage Works Inc.

argued.: May 20, 1963.

SYLVIA KLEIN, EXECUTRIX OF THE ESTATE OF PHILIP KLEIN
v.
AMERICAN LUGGAGE WORKS, INC., JOHN WANAMAKER PHILADELPHIA, INCORPORATED, AND STRAWBRIDGE & CLOTHIER.



Author: Kalodner

Before KALODNER, STALEY and SMITH, Circuit Judges.

By KALODNER, Circuit Judge: In this private anti-trust action by a retailer against a manufacturer and two department stores, based on alleged violation of the Sherman Anti-Trust Act,*fn1 the District Court*fn2 found that the manufacturer unlawfully exceeded "limits of permissibility" in maintaining its "suggested retail price policy", and that the department stores participated with the manufacturer in an illegal price fixing conspiracy, and enjoined the manufacturer from refusing to supply the retailer and "from affixing or attaching resale prices to its merchandise delivered for resale in the State of Delaware"; and entered judgment for damages against the defendants, "jointly and severally" in the amount of $12,724.92, and ordered them to pay the retailer's counsel $7,500.00.

The crux of the manufacturer's position is that its suggested retail price policy was maintained and enforced within the permissible limits defined by the Supreme Court in United States v. Parke, Davis & Co., 362 U.S. 29 (1960), and United States v. Colgate & Co., 250 U.S. 300 (1919).

The sum of the contention of the department stores is that they merely sold the manufacturer's products at suggested retail prices and such conduct does not, without more, constitute a violation of the Sherman Act; they played no part in the maintenance or enforcement of the manufacturer's price policy, and they did not agree, "tacitly" or otherwise, with the manufacturer, or with one another, to sell at suggested retail prices.

The retailer's reply to these contentions, as stated in his brief, is that "the manufacturer's refusal to sell to a retailer who fails to resell at prices stipulated by the manufacturer and adhered to by competing retailers in pursuance of a resale price maintenance structure violates the Sherman Act."

Certain of the District Court's fact-findings are undisputed on this appeal; others are vigorously challenged as completely lacking in evidential basis.*fn3

The undisputed fact-findings may be summarized as follows:

Philip Klein ("Klein"), now deceased,*fn4 a citizen of Delaware, owned and operated two discount stores, one in Wilmington, Delaware, and the other just outside the city limits. American Luggage Works, Inc. ("American"), is a Rhode Island corporation engaged in the manufacture and sale of luggage in interstate commerce. John Wanamaker Philadelphia, Inc. ("Wanamaker"), a Pennsylvania corporation, has operated a branch department store in suburban Wilmington since November, 1950. Strawbridge & Clothier ("Strawbridge"), a Pennsylvania corporation, has operated a branch department store in suburban Wilmington since October, 1952.

American commenced selling its luggage products to Klein in 1949 and continued to do so until January 23, 1956 when it stopped supplying Klein because he sold below suggested retail prices. American has sold its luggage products to Wanamaker since 1950 except for a period between August 1954 and August 1955 when Wanamaker suspended relations because of its dissatisfaction with the quality of merchandise shipped to it. American has supplied Strawbridge continuously since 1952.

It was American's policy to limit its sales to retailers "willing to respect", as the District Court put it, its suggested retail prices. It listed such prices in its catalogues and on price tags affixed to merchandise which it sold. American's sales representatives were instructed to advise new accounts, other than department stores, that full compliance with suggested retail prices was mandatory. The exception with respect to the department stores was premised on the fact that the suggested prices reflected their normal "mark-up". American had no formal method of policing adherence to its suggested prices. Failure to adhere to preticketed prices resulted in cessation of the offending retailer's supply.

Klein was a "discount" merchant and continuously sold American's products below suggested prices. Wanamaker and Strawbridge sold at the suggested prices. No express agreement to maintain preticketed prices ever existed between American and either Strawbridge or Wanamaker, nor did American ever seek or receive a commitment from the two stores to maintain such prices. Wanamaker and Straw-bridge did not agree with one another to maintain suggested prices.

One Louis D. Forman, sales representative of American, serviced its accounts with Klein, Wanamaker and Strawbridge at all times material herein. He established the account with Klein "with strong suspicion of the latter's discount activities."

From time to time Wanamaker and Strawbridge sales clerks voiced to Forman complaints from potential customers that American luggage was available elsewhere in Wilmington below preticketed prices. A Strawbridge luggage buyer, Lou Spano, at an undetermined time between the opening of the store in 1952 and May 28, 1955, when he left Strawbridge, told Forman that "someone was selling off price in Wilmington, Delaware." A Wanamaker luggage buyer, William Leahy, on an occasion prior to February 1, 1953, when he ceased to be Wanamaker's luggage buyer, complained of American's sales to discounters. None of the complaints or comments by the sales clerks or Spano or Leahy made reference to any specific merchant.

In January 1956, the president of American and its vice-president in charge of sales visited Klein's Wilmington store in the course of a survey of retailers "in an effort to ascertain whether the most desirable outlets were utilized in marketing" its luggage products. In the course of the visit Klein's display of the American line was found unattractive, and his discounting activities were discovered, and approximately one week later American sent notice to Klein that it would no longer supply him. Forman, who was unaware of the visit of the American officers to Klein's, at Klein's instance, made inquiries of American as to the reasons for discontinuance of its account and was advised that it was due to the discounting. Later, at a meeting with executives of American, Klein was advised ...


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