The opinion of the court was delivered by: MASTERSON
This is a motion by plaintiff for judgment notwithstanding the verdict of the jury or, in the alternative, for reconsideration of plaintiff's motion for a new trial. We denied plaintiff's motion for a new trial on the date the jury returned its verdict. We thereafter vacated our oral denial of that motion and have reconsidered it. We again deny the motion.
This action was initiated under Section 16 of the Clayton Act, 15 U.S.C. § 26, for equitable relief, and under Section 4 of the Clayton Act, 15 U.S.C. § 15, to recover treble damages against defendants for violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. The action was brought by Harry Williams, plaintiff, against Independent News Co., Inc. ("Independent") and National Periodical Publications, Inc. ("National").
Plaintiff was a distributor of off-sale full-copy return comic books
during, but not limited to, the period from January 1, 1962 to December 31, 1969. Defendants Independent and National were a national distributor and publisher, respectively, of magazines and periodicals, including comic books, during, but not limited to, the period from June 14, 1957 to December 31, 1969. Independent was a wholly-owned subsidiary of National, during but not limited to, the period from June 14, 1957 to December 31, 1969. Magazine Management Company ("Magazine") was the publisher of Atlas comic books during the same period. Magazine is not a party to this action.
On June 14, 1967, Magazine contracted with Independent for the exclusive distribution of Atlas comics. Pursuant to and during the existence of the contract between Magazine and Independent, Magazine had the right to request the return of off-sale full-copy Atlas return comic books. Pursuant to the contract, Magazine gave to Independent its most current issue of Atlas comic books and Independent distributed them to its wholesalers. Independent's wholesalers distributed the current Atlas comic books to retailers who sold them to the public. When the current Atlas comic books arrived at the retailers, it was the practice for the retailers to gather together any previously distributed Atlas comics which had not been sold and return them with their covers intact to Independent's wholesalers. The wholesalers then shipped the returned comics to a warehouse designated by Magazine pursuant to Magazine's request for return of off-sale full-copy return comic books.
Upon the return of the Atlas comic books by each party in the chain of distribution to another party, a full credit was given to such party so that he was not charged for them. Upon the ultimate return of the comic books to the warehouse designated by Magazine, Independent then paid Magazine for the actual number of Atlas comics of that issue that had been distributed and sold through Independent, less Independent's commission.
Magazine sold some of the off-sale full-copy Atlas return comic books to Israel Waldman ("Waldman") who sold them to plaintiff. It was represented to Magazine by Waldman that these comic books would be used as premiums.
Waldman promised not to distribute the comics to the general public or offer them for resale to the general public. Instead, the comic books purchased by Williams proceeded down the chain of distribution to plaintiff's wholesalers and then to their retailers who sold them at a lower price than a new issue comic book. The off-sale full-copy Atlas return comic books sold and distributed by plaintiff competed at the retail level with Atlas and National current cover comic books distributed by Independent's wholesalers.
Before the date on which Magazine ceased selling the off-sale full-copy Atlas return comic books to Waldman, National was concerned about the effect on its subsidiary, Independent, of the sale of back issue comic books in competition with current Atlas and National comics. Moreover, Independent knew, before the date on which Magazine ceased selling to Waldman, that some of the back issue Atlas comic books which were appearing and competing with current Atlas and National comic books in Independent's wholesalers' areas of principal responsibility were being distributed and sold by plaintiff. National discussed the problem with Independent.
Plaintiff presented a two-pronged theory of recovery at trial. He alleged that Independent complained to Magazine about the loss of business caused by the competition with back issue comics sold and distributed by Harry Williams. He averred that either or both of the defendants agreed with or came to an understanding with Magazine to prevent the continuation of such competition. Plaintiff argued that it was unlawful for defendants to agree not to sell to Waldman for the purpose of preventing Williams from competing with Independent News.
Plaintiff also argued that it is unlawful for a manufacturer to seek to impose area restrictions on the right of resale of an article after the manufacturer has parted with title, dominion and risk of loss with respect to the product. Plaintiff alleged that in this case, Independent parted with all title, dominion and risk of loss with respect to the Atlas comics when it returned them to Magazine for a credit. Plaintiff argued at trial that it was unlawful for Independent to attempt to limit the method Magazine could use to redistribute the comics after Independent had parted with all vestiges of control.
In our instructions to the jury, we stated that the Sherman Antitrust Act prohibits every contract, combination or conspiracy in restraint of trade. (N.T. 489). We added, however, that the Supreme Court has adopted the rule of reason to avoid the absurd results of a literal application of the Act. (N.T. 490).
Only contracts which unreasonably restrain trade are illegal. Exclusive distribution contracts, for example, are not in themselves an unreasonable restraint of trade. A manufacturer has the right to establish an ...