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Dovberg v. Dow Chemical Co.

filed: December 3, 1965.

IKE DOVBERG AND MAURICE DOVBERG, INDIVIDUALLY AND TRADING AS PASTE COMPANY OF AMERICA
v.
DOW CHEMICAL COMPANY, PENNSYLVANIA PASTE COMPANY, SAMUEL SCHULTZ, ADA SCHULTZ, MARVIN L. SPIRO AND ISADORE KAPLAN, INDIVIDUALLY AND TRADING AS SAMUEL SCHULTZ & CO., A PARTNERSHIP, AND REBA SPIVAK, INDIVIDUALLY AND TRADING AS ATLAS WALLPAPER & PAINT CO.



Kalodner, Chief Judge and Biggs, McLaughlin, Staley, Hastie, Ganey, Smith and Freedman, Circuit Judges. Kalodner, Chief Judge, dissenting.

Author: Ganey

GANEY, Circuit Judge:

This is an action under the antitrust laws, §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2,*fn1 and of the Clayton Act, as amended, 15 U.S.C. §§ 13 to 15 inclusive.*fn2 Originally, the plaintiffs named nineteen defendants in the action, either individually or by their firm names. Through interrogatories and depositions, by way of discovery, and agreements to dismiss, the case went to trial on November 29, 1961, with only the Dow Chemical Company, Pennsylvania Paste Company, Samuel Schultz, Ada Schultz, Marvin Spiro and Isadore Kaplan, individually, and trading as Samuel Schultz & Co., Reba Spivak, individually, and trading as Atlas Wallpaper & Paint Co., and Samuel Milkas, individually, and trading as Empire Wallpaper & Paint Co. remaining as defendants.

As adverted to above, after bringing into the sweep of the alleged conspiracy nineteen defendants, only two, the Pennsylvania Paste Co. and Schultz, whom the jury found guilty of the conspiracy count, are left, who are the appellants here. A verdict was rendered in favor of two of the defendants, the Dow Chemical Co. and Reba Spivak, individually, and trading as Atlas Wallpaper & Paint Co., but, as indicated above, the defendants, Pennsylvania Paste Co. and Schultz were found guilty of violation of § 1 of the Sherman Act. All the defendants were acquitted of charges contained in § 2 of the Act after the court below had refused a motion for summary judgment and, at the close of the plaintiff's case, denied motions for judgment as to all the defendants, except Samuel Milkas, individually, and trading as Empire Wallpaper & Paint Co., against whom no evidence had been offered, and, at the conclusion of all the evidence, the defendants submitted motions for a directed verdict which were likewise refused by the court. Accordingly, after trial and judgment, the court below vacated the judgment and granted judgment n.o.v., in accordance with Rule 50(b) of the Rules of Federal Procedure. Thus, this appeal concerns itself only with the defendants, Pennsylvania Paste Co. and Schultz.

It is requisite, in order to determine whether the defendant, Schultz, was a party to an alleged conspiracy with the Pennsylvania Paste Co. to preserve the dominance of the Pennsylvania Paste Co. in the wet paste industry in this area, by driving the plaintiff out of business, to critically examine a long, tedious and dreary record of nearly 6,000 pages and over 500 exhibits. In order to place in precise focus the factual matters on which the alleged offense is predicated, it is necessary to place in some chronological order the dates and the exact testimony of the witnesses involved, rather than resort to any generalization.

This case was one of the longest ever tried in the history of the Eastern District of Pennsylvania, and the court below, knowing the intricacy thereof and the complexity of the evidence to be submitted, finally, after many weeks of discovery through depositions and interrogatories, directed the plaintiff, in order to bring the matter into proper focus, to file a pretrial statement of the contentions he was going to present at the trial in order to clarify the precise issue posed by the plaintiff, as well as to apprise the defendants of the nature of the cause of action he was suing on. After several requests for extensions, the plaintiff, on December 30, 1959, filed a 17 page pretrial statement in which he set forth, in great detail, his contentions, and in so doing gave the history of the case from 1949 on down to the filing of the second amended statement of claim, on December 31, 1959. (It is to be noted that while the second amended statement of claim was filed one day after the pretrial statement of December 30, 1959, the amended statement of claim was in the hands of all of the counsel for defendants on November 17, 1959, and it was never amended or changed in the slightest.) The pretrial statement or statement of contentions of the plaintiff, as he labeled it under the heading, "b. The Legal Basis for the Claim Against Pa. Paste", on page 5 thereof, states: "Plaintiffs' basic contention of law is that the Pennsylvania Paste Co. conspired with the other defendants to destroy the plaintiffs' business and thereby preserve Pennsylvania Paste's dominant position in the wet paste manufacturing business in the Philadelphia area." This contention was referred to time and time again in the plaintiff's argument and in his brief as being the real core of the conspiracy; that it was the intention of the defendant, Pennsylvania Paste Co., in order to maintain its supremacy in the wet paste industry in the Philadelphia area, to drive the plaintiff out of business. In the pretrial statement, The Legal Basis for the Claim Against Pa. Paste covers nearly 4 pages, the contentions as to the Dow Chemical Co. cover 3 pages and the contention therein stated as to the retailers covers approximately 1 page, 1/2 of which is devoted to the retailers generally, all of whom were acquitted or dismissed by the court, and less than 1/2 page to the basis for the plaintiff's claim against the defendant, Schultz. Both charges against Schultz are short and, therefore, we quote the exact language, taking the second charge first, which is as follows: "Plaintiffs also contend that, pursuant to the conspiracy alleged, the defendant, Samuel Schultz, induced United Wallpaper Co. to imitate and sell an imitation of plaintiffs' cellulose paste and, that after plaintiffs' product had been patented, he also discouraged a potential purchaser of the plaintiff's business from following through on the purchase by telling the prospective purchaser that anyone could manufacture the plaintiffs' products."

The above occurred in the fall of 1951, and concerned itself with a product manufactured by Dovberg called "Calico", a cellulose base wallpaper paste, a package of which was brought to the Schultz store at 2104 North Front Street, Philadelphia, and given to him as a sample, and Schultz replied that if, when he tested the same, it worked out as Dovberg said it would, he would be glad to take it to the United Wallpaper Co., a large concern, and see if he could get them interested on Dovberg's behalf. He further told Dovberg he would tell him what they thought of the product and if they liked it, they would not only manufacture it, but they would also license rights for it. Schultz promised to let him know about it and Dovberg said he was "very grateful and very much elated." However, Dovberg never again discussed this matter with either Schultz or any representative of his and the matter was dropped and there is nothing in the record to show whether the United Wallpaper Co. thought anything of the product or that they manufactured it. Therefore, it is obvious from the record that there is no warrant for this allegation against Schultz and it must be discarded.

The remaining and sole contention which must be relied upon by the plaintiffs is the second and last one wherein the pre-trial statement reads as follows: "Plaintiffs also contend that, at the instigation of the Pennsylvania Paste Co. and pursuant to the conspiracy alleged, the retail defendants sold the wall-size eliminator which they purchased from the Pennsylvania Paste Co. as being the same thing as Nix-size. Apart from its connection with a conspiracy to restrain trade, such an activity would be improper under the principles in the RESTATEMENT TORTS §§ 711 and 712, 741(b) and 743."

The statement of claim filed September 25, 1958, makes it requisite, in the face of the four-year statute of limitations, that the actionable cause of the conspiracy concerns itself with the conduct of Schultz and the Pennsylvania Paste Company from September 25, 1954, to September 25, 1958.

The theory of the plaintiff is that the conspiracy had its origin in the conduct of the parties previous to 1954, and, more particularly, that there was a conspiracy to drive the plaintiff, Dovberg, out of business in order for the Pennsylvania Paste Company to maintain its dominant position in the wet paste industry which allegedly originated previous to 1954, and as hereafter adverted to.

Briefly, the facts, as regard Schultz's alleged participation in a conspiracy with the Pennsylvania Paste Company, concern a relatively small part of the record and we shall relate them. The Pennsylvania Paste Company held a dominant position in the manufacture of wet paste and had been so doing since 1892, and it controlled more than 50% of the wet paste marketed in the Philadelphia area and, although it made dry paste, the manufacture of wet paste was much more profitable and it, accordingly, concentrated on it. The plaintiff, as early as 1949, was manufacturing a wall-size eliminator called Nix-size and in February, 1950, opened a small plant for the making of Nix-size and wet paste. The plaintiff marketed its wet paste in wooden tubs and sold the same in the Philadelphia area to its customers, some of whom formerly had been with the Pennsylvania Paste Company. The record discloses that many of these tubs were appropriated by the Pennsylvania Paste Company drivers and later, when the plaintiff changed its wet paste product to be marketed in fiber drums, these drums likewise mysteriously disappeared and, although the Pennsylvania Paste Company denied any participation therein, the plaintiff found, upon visiting the plant of the Pennsylvania Paste Company, that some of these containers were in their plant. Nevertheless, the record is devoid of any connection of Schultz with this conduct and, in fact, his name was never mentioned in connection therewith as up to this time he had not begun to purchase wet paste from the plaintiff, Dovberg. However, Schultz, who had been doing business with the plaintiff as related since 1949 in other products such as Nix-size, began buying wet paste from the plaintiff on August 25, 1950, and continued up to October 28, 1950, when he discontinued buying from Dovberg, as he had purchased during this period the trivial amount of $32, although he maintained business with Dovberg buying his related products until March of 1952, when he discontinued purchasing Nix-size from him, which, as shall be adverted to later, has nothing whatsoever to do with the plaintiff's going out of the wet paste business. The testimony plainly shows that, although the plaintiff first testified he went out of the wet paste business in October, 1950, on later examination, he stated finally that he went out of the wet paste business in January, 1951, and he further testified that he so did because the Pennsylvania Paste Company was successful in driving him out of it and, in so stating, he never accused Schultz of any complicity whatever in his abandoning the wet paste business. He further testified that he never made wet paste thereafter, except on rare occasions and for a few special customers and, accordingly, he was, in no sense, in the wet paste business as to be competitive of the Pennsylvania Paste Company thereafter. As of January 1, 1951, it is apparent that the "conspiracy alleged" of both the Pennsylvania Paste Company and Schultz, in driving the plaintiff out of the wet paste business in order that the Pennsylvania Paste Company might maintain its dominance in the wet paste industry, died aborning, as Schultz was, on the record, in no wise connected therewith. While the record discloses that in a telephone conversation between the plaintiff, Dovberg, and Flanagan of the Pennsylvania Paste Company, on September 12, 1950, Flanagan told the plaintiff, Dovberg, that he understood he was making wet paste and that he would "drop dead" before he would lose one customer to him and that he was going to drive him out of business, that, here again, there is nothing in the record showing any connection whatsoever of Schultz with this statement of Flanagan or any conduct on the part of Schultz which could be construed as anything agreeing with the statement Flanagan made, as Schultz's name was not even mentioned in connection therewith. It is to be remembered that at the time this statement was allegedly made by Flanagan, Schultz had already stopped buying wet paste from the plaintiff, Dovberg, even though it was in exceedingly small amounts totaling, as adverted to before, some $32. On another occasion, late in 1951, Dovberg testified that Schultz called him and testified that Flanagan was "gunning mad" at him for purchasing his wet paste and Schultz advised him not to make wet paste for if he continued to make and sell it Flanagan was the type of fellow who could put him out of business. It is to be remembered that this is flatly contradictory of Dovberg's previous statement that the Pennsylvania Paste Company had successfully driven him out of business on January 1, 1951, as well as the fact that Schultz had stopped purchasing wet paste from Dovberg on October 28, 1950. This is the only testimony that, in any wise, connects Schultz with any knowledge of any relationship between the plaintiff, Dovberg, and the Pennsylvania Paste Company. However, it is also to be remembered that at the time of this conversation Schultz and Dovberg were on the most friendly terms and Schultz continued to do business with Dovberg for more than a year and a half thereafter. The record further discloses that Schultz stopped purchasing Dovberg's products on March 14, 1952, and the day before Schultz called Dovberg on the phone and told him the reason therefor that Flanagan of the Pennsylvania Paste Company was in to see him and left a sample of a product just like Nix-size and advised him, Schultz, that it had the same effect as Nix-size and that he would manufacture it for him under Schultz's private label, since Schultz, a very large retailer, sold most of his products under his own label. He further advised plaintiff Dovberg, that he had a contract from the Pennsylvania Paste Company on his desk to buy the product and that he could sell it for much less than he could get Nix-size from Dovberg and by reason of these circumstances, when he had sold out his present inventory which he had purchased from him, Dovberg, he was not going to buy any more from him. Dovberg's reply to Schultz in this conversation was that he could not

conceive of Flanagan selling a product similar to his at a lesser price unless he was putting into effect a threat he had made to him, Dovberg, to put him out of business and " if they did anything in joining an effort combined to hurt our business " that he would have to hold Schultz responsible therefor. However, on the very same day he wrote a letter to Schultz wherein he referred to this conversation, but made no mention whatsoever of a threat that had been made to him nor anything whatsoever about a joint effort to put him out of business. Furthermore, he closed the letter referring to their very good friendship and the friendly company that was Schultz, whom he "yearns to do business with" and with the hope that they would be able to serve him in the future. The only conclusion that could be drawn from the letter was one of a warm spirit of

friendship and the regret that he was no longer to do business with him, Dovberg. If we draw the most favorable inference possible from the conversation and letter, it certainly does not comprise a conspiracy between defendant, Schultz, and defendant, Pennsylvania Paste Company, through Flanagan, concerning the wet paste business. For here again, it is to be remembered that this conversation in which defendant, Schultz, advised the plaintiff, Dovberg, that he was no longer going to buy Nix-size because it produced the same results as Nix-size did and because it was cheaper, was more than a year and a half after Schultz stopped purchasing wet paste from the plaintiff, Dovberg, and more than a year after Dovberg had gone out of the wet paste business for which he personally accused only the Pennsylvania Paste Company.

During the years 1954 to 1958, which constitute the actionable claim for conspiracy, the record is devoid of any conversations between the Pennsylvania Paste Company and the defendant, Schultz, concerning the plaintiff, Dovberg, from which anything like a conspiracy could be inferred and there was nothing in the conduct of the defendant, Schultz, other than his purchasing Magi-coat, similar in style and effect to Nix-size, but at a lesser price, which was manufactured by the Pennsylvania Paste Company for Schultz under his private label, Magi-coat, and Schultz's failure to make any further purchases of anything whatsoever from Dovberg thereafter.

It is likewise significant that through hundreds of pages of testimony covering some nineteen witnesses over many days of trial, they concerned themselves solely with various customers complaining to plaintiff, Dovberg, that the Pennsylvania Paste Company was selling Liqui-size, which it manufactured at a cheaper price than Nix-size and, in some instances, Flanagan again threatened to drive Dovberg out of business, but in this long record of testimony there is not a single instance in which any of these customers ever even hinted at Schultz's being involved with the Pennsylvania Paste Company in any conspiracy, nor, in fact, even mentioned Schultz's name in connection therewith.

It may well be that, on a better record, though questionably, a case of unfair competition might be made out against the Pennsylvania Paste Company for palming off their products, Liqui-size and Magicoat, allegedly in imitation of the plaintiff's product, Nix-size. However, nothing in the testimony, it is submitted, gives rise to an actionable case of conspiracy against the plaintiff between the Pennsylvania Paste Company and Schultz.

A critical examination of this record shows, neither directly nor by circumstantial evidence, any conspiratorial conduct on the part of Schultz with the Pennsylvania Paste Company, to drive the plaintiff, Dovberg, out of business, in order to preserve the Pennsylvania Paste Company's dominant position in the wet paste industry. We reach this conclusion, using as the guide on appeal, that this court must consider the evidence in its strongest light in favor of the party against whom the motion is made and the appellant here, and giving him the advantage of every fair and reasonable intendment that the evidence can justify. Delaware Valley Marine Supply Co. v. American Tobacco Co., (3rd Cir.), 297 F.2d 199, cert. denied 369 U.S. 839, 7 L. Ed. 2d 843, 82 S. Ct. 867; Hornin v. Montgomery Ward & Co., (3rd Cir.), 120 F.2d 500; Viking Theatre Corp. v. Paramount Film Distributing Corp. (3rd Cir.), 320 F.2d 285, aff'd 378 U.S. 123, 12 L. Ed. 2d 743, 84 S. Ct. 1657; Pearl Assurance Co. v. Stacey Bros. Gas Construction Co., 114 F.2d 702; Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 8 L. Ed. 2d 777, 82 S. Ct. 1404; Moore's Federal Practice, 2nd Ed., Vol. 5, p. 2316.

Accordingly, the order of the court below in granting judgment n. o. v. is affirmed.

KALODNER, Chief Judge, dissenting:

I dissent from the majority's conclusion that the evidence was insufficient to support the jury's verdict, and its affirmance of the District Court's Order granting the defendants' motions setting aside the jury's verdict in favor of the plaintiffs.

In my opinion, the evidence, viewed in the light most favorable to the plaintiffs, as it must be,*fn1 reasonably permitted the jury's finding that the defendant Pennsylvania Paste Company ("Pennsylvania") acted to destroy the plaintiff's business, and the defendant Samuel Schultz & Co. ("Schultz") was aware of its ...


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