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ALLGAIR v. GLENMORE DISTILLERIES CO.

June 19, 1950

ALLGAIR
v.
GLENMORE DISTILLERIES CO., Inc., et al.



The opinion of the court was delivered by: KAUFMAN

The defendants Glenmore Distilleries Company, Inc. (hereafter called 'Glenmore'), New England Wine & Liquor Co. Inc. (hereafter called 'New England') and Conway Company, Inc. (hereafter called 'Conway') have moved for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, 28 U.S.C.A. The Conway Liquor Co. Inc. in the title of this action appears to be a misnomer for the Conway Co. Inc.

The complaint alleges that plaintiff is a distributor of liquors in New Jersey; that between October 1, 1946 and March 17, 1949 plaintiff paid Glenmore more than $ 150,000 as the purchase price for liquors sold to plaintiff; that all of the defendants were engaged in a combination and conspiracy to receive extra compensation, other than for services, supplementing the purchase price; that the scheme was worked out as follows: Glenmore offered the liquor to the plaintiff on condition that plaintiff pay additional compensation to Glenmore's designees; that Glenmore designated New England and Conway as the companies to which plaintiff was required to pay the extra compensation described as a 'participation'; that plaintiff paid said extra purchase price in advance on September 12, 1946 amounting to $ 13,800; that payment of part of said extra purchase price was accomplished through the delivery of a check made out to Conway Liquor Co. Inc. and endorsed to Conway and American Beverage Co.

 The action is for treble damages and is based on Sections 2(c) and 4 of the Clayton Act, the plaintiff contending that he was injured in his business by reason of the unlawful receiving of added compensation by the defendants in connection with a sale of goods in interstate commerce.

 Section 2(c) of the Clayton Act, added by Section 1(c) of the Robinson-Patman Act, 15 U.S.C.A. § 13(c) reads as follows: '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.'

 Section 4 of the Clayton Act, 15 U.S.C.A. § 15 provides: 'Any person who shall be injured in his business or property by reason of anything forbidden in the anti-trust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover three-fold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee.'

 Defendant Glenmore is engaged in the business of distilling, selling, and distributing whiskey. New England and Conway are wholesale liquor dealers. It is admitted that Glenmore made the alleged sales to plaintiff and that in connection with the sales participation payments were made by plaintiff to New England and American Beverage Co., which was substituted for Conway in the transaction. The defendants contend however that there was nothing illegal about the transaction but that New England and American were paid for giving up valuable rights to the liquor which they agreed should be turned over to the plaintiff. Therefore they ask that summary judgment be granted in their favor.

 The defendants say further, that even assuming the transaction to be illegal under Section 13(c) of Title 15 U.S.C.A., plaintiff, in paying the 'other compensation' was himself a violator of Section 13(c) and therefore in pari delicto with the defendants; that this would preclude recovery of damages under Section 15 of Title 15 U.S.C.A.

 This contention must be considered at the outset, for if defendants are correct, then the plaintiff's action must be dismissed. Neither party disputes the fact that one cannot recover on an illegal transaction to which he is a party and also in pari delicto.

 It is obvious that the literal terms of Section 13(c) make it unlawful for any person to pay other compensation, as well as to receive such compensation, and that therefore plaintiff upon his own allegations and admissions is at least a technical violator of Section 13(c). See 80 Cong.Rec. 3115, March 3, 1936; House Report No. 2287, 74th Cong. 2d Sess. (Mar. 31, 1936); House Report No. 2951, 74th Cong. 2d Sess. (June 8, 1936).

 The defendants contend that the plaintiff, as well as any person who pays a rebate, commission or other form of brokerage, no matter what the reason for such payments nor the damage to the one making the payments, if thereby automatically precluded from recovering under Section 15, supra. The exact question has not heretofore been considered by any court. This Court, however, after deep consideration is constrained to disagree with the defendants' theory.

 The reasoning behind the decision of the Court of Appeals for this Circuit in the case of Ring v. Spina, 1945, 2 Cir., 148 F.2d 647, 160 A.L.R. 371, compels this conclusion. Plaintiff in that action was a theatrical production investor who signed a so-called 'Minimum Basic Agreement' with The Dramatists' Guild as a prerequisite to entering into a contract with the authors of the play that he was to produce. A disagreement subsequently arose and the show closed. Plaintiff sued the authors and the Guild for treble damages under Section 15 on the ground that the Agreement that he had been required to sign was an illegal agreement under the Sherman Act. The district court had denied plaintiff's motion for a temporary injunction pending trial, and one of the grounds for this denial was its belief that plaintiff's participation in any possible combination, as evidenced by its signing the Basic Agreement, was sufficient to require denial of relief. The Court of Appeals overruled this view stating:

 ' * * * he (plaintiff) had to sign to save his $ 50,000 investment and to safeguard his further attempts to bring the venture to fruition. This seems to us a prima facie showing of economic coercion. * * *

 'It is well settled that where one party to an illegal contract acts under the duress of another the parties are not in pari delicto. * * * And in actions for triple damages under the Sherman Act a showing of economic duress similar to that asserted here has been held sufficient proof that the plaintiff is not a party to the monopoly. * * *

 'Where the parties stand actually in pari delicto, the law should leave them where it finds them. * * * But here even without a showing of economic coercion as the final step in forcing him to sign the Basic Agreement, plaintiff is precisely the type of individual whom the Sherman Act seeks to protect from combinations fashioned by others and offered to such individual as the only feasible method by which he may do business. Considerations of public policy demand court intervention in behalf of such a person, even if technically he could be considered in pari delicto. Indeed, this is a general principle applicable beyond the anti-trust field. * * * Any other conclusion would mean that for many, perhaps ...


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