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UNITED GROCERS' CO. v. SAU-SEA FOODS

March 22, 1957

UNITED GROCERS' COMPANY, a New York Corporation, Plaintiff,
v.
SAU-SEA FOODS, Inc., and Ernest Schoenbrum and Abraham Kaplan, doing business as Shore Distributors, Defendants



The opinion of the court was delivered by: DIMOCK

According to an allegation of the complaint, this action arises under sections 13 and 15 of title 15 of the United States Code. Section 13 is that part of the Clayton Act which makes unlawful price discriminations the effect of which may be substantially to lessen competition, tend to create a monopoly or injure competition. Section 15 is the section which gives a private right of action for threefold damages. Defendants move that the complaint be dismissed under Rule 12(b)(6), F.R.C.P., 28 U.S.C. and Rule 12(h)(2) on the grounds that it fails to state a claim under which relief can be granted and it appears that the Court lacks jurisdiction of the subject matter.

Plaintiff opposes the motion on the ground that a motion by defendant for summary judgment has already been denied. It was denied, however, on the ground that issues of fact were presented. It may well be that issues of fact were joined by the parties in affidavits submitted on the motion for summary judgment without there being any statement in the complaint of a claim on which relief could be granted and without the Court's having jurisdiction of the subject matter. It does not appear from the Court's opinion that it accepted the complaint as defining plaintiff's charge. Indeed, in stating plaintiff's charge, the Court included material not alleged in the complaint and which must have been obtained from plaintiff's affidavits and a deposition of one of plaintiff's officers which were before the Court. The sufficiency of the allegations of the complaint have thus not been passed upon and the way is open for the prosecution of this motion to dismiss the complaint.

 The complaint alleges that defendant corporation, with its principal place of business in Yonkers, New York, at all of the times therein mentioned, manufactured, packed, processed and distributed certain frozen food products, among which were frozen shrimp; that the two individual defendants, at all such times, were partners, with their principal place of business with defendant corporation, and were engaged in the sale and distribution of frozen foods.

 Plaintiff, with its principal place of business in Brooklyn, New York, is alleged to be engaged in the business of distributing frozen food products to over 5,000 small independent retail food merchants who are in active competition with other larger units owned and operated by chain store corporations. The complaint says that plaintiff, at all the times therein mentioned, was and is in competition with other distributors of frozen food products and 'is required to' purchase on equal terms with other buyers of the same class free from discriminatory trade practices; that it is essential to plaintiff's business that it be enabled to supply its said customers at prices low enough to permit competition with large chain store retail operators.

 Plaintiff alleges that, from April 10, 1956, to July 10, 1956, it purchased from individual defendants, as the sales agents of corporate defendant, packages of frozen shrimp; that on or about May 21, 1956, 'in accordance with plaintiff's policy as aforementioned', it reduced its price to its customers from $ 4.60 per dozen packages to $ 4.15 per dozen, which price was above cost plus a reasonable mark-up.

 Then come paragraphs 11, 12 and 14 which contain every word in the complaint addressed to the statement of any legal wrong committed by defendants. They follow:

 '11. That defendants, acting in concert with other persons engaged in the business of distributing frozen food products, on or after the 21st day of May, 1956, objected to the price at which plaintiff sold the said commodities and requested and demanded of plaintiff that it increase its price to the suggested resale sale price of $ 4.60 per dozen, to which demands and requests plaintiff refused to accede.'

 '12. That defendants, acting in concert and in furtherance of their conspiracy to create an unreasonable restraint of trade and to fix the resale price at which the said commodities would be sold by plaintiff, in violation of the aforesaid Section 13 of Title 15 of the United States Code Annotated, refused and still refuses to sell to plaintiff any of the aforedescribed products, and that plaintiff is and continues to be injured and damaged in its business by reason thereof.'

 '14. That the aforesaid products manufactured, processed, distributed and sold by defendants are products shipped and distributed in interstate commerce.'

 I cannot but think that the draftsman of these paragraphs was proceeding under the rule of Dioguardi v. Durning, 2 Cir., 139 F.2d 774, and was unfamiliar with the host of cases *fn1" which require that the complaint in an antitrust case state a cause of action instead of merely stating a claim.

 The pleader does not tell us who the other persons were with whom defendants acted in concert in objecting to plaintiff's reduced price and demanding that the suggested price be restored.

 He next alleges that 'defendants, acting in concert and in furtherance of their conspiracy to create an unreasonable restraint of trade and to fix the resale price at which the said commodities would be sold by plaintiff' refused to sell to plaintiff. This is the first time that it is charged that defendants acted in conspiracy.

 No connection between defendants' conspiracy to restrain trade and fix prices, on the one hand, and the competitive position of plaintiff and plaintiff's customers on the other, is alleged or suggested. It is not alleged that defendants knew anything about plaintiff's competitive position.

 We have the bare allegation that defendant corporation and defendants, its selling agents, acting in concert with other persons in the business, objected to plaintiff's price cut and demanded the restoration of a suggested price and that defendants, presumably after the refusal to restore the price, refused to sell to plaintiff in furtherance of a conspiracy between them to create an unreasonable restraint of trade and to fix the resale price. Construing the complaint with great liberality one might say that it alleged that defendant seller and defendants sales agents conspired to restrain trade and fix the resale price of the frozen shrimp that they sold and that, on plaintiff's refusal to adhere to the resale price that they suggested, they refused to sell to plaintiff. From this one might infer that defendants would sell to plaintiff on condition that plaintiff adhere to the resale price. So, if it were alleged that defendants sold to others without imposing that ...


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