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P. W. HUSSERL, INC. v. SIMPLICITY PATTERN CO.

February 7, 1961

P. W. HUSSERL, INC., Paul W. Husserl and Solomon Motove, doing business as Paul W. Husserl, Louis Smiles, Roy Smiles and Blanch Smiles, doing business as Smiles Stores, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
SIMPLICITY PATTERN CO., Inc., Defendant



The opinion of the court was delivered by: BRYAN

This is a private action brought pursuant to 15 U.S.C.A. § 15, in which plaintiffs, suing on behalf of themselves and all others similarly situated, seek to recover treble damages from defendant Simplicity Pattern Co., inc., for alleged violation of Section 2(e) of the Clayton Act as amended by the Robinson-Patman Act (15 U.S.C.A. § 13(e)).

The suit stems from Federal Trade Commission v. Simplicity Pattern Co., 360 U.S. 55, 79 S. Ct. 1005, 3 L. Ed. 2d 1079, in which the Supreme Court affirmed a cease and desist order of the Federal Trade Commission based upon findings that Simplicity, in violation of Section 2(e) as amended, had discriminated in favor of its larger customers by furnishing to them services and facilities not accorded to competing smaller customers on proportionately equal terms.

Plaintiffs, P. W. Husserl, Inc., Paul W. Husserl and Smiles Stores, commenced this action against Simplicity within a month after that case was decided. These plaintiffs are retail stores engaged primarily in the sale of yardgood fabrics and notions who purchase dress patterns from Simplicity for sale in their stores. They claim that they were damaged by the practices of Simplicity found to be discriminatory by the Commission, and that they fall within the category of customers against whom Simplicity was found to have discriminated. Plaintiffs rely on the Supreme Court decision as prima facie evidence of violations of the anti-trust laws by the defendant. 15 U.S.C.A. 16.

 Since the action was commenced numerous other plaintiffs claiming to be in the same category have been permitted to intervene and there are now some 43 plaintiffs in the action. Each seeks judgment for money damages in a stated sum alleged to have been suffered by reason of Simplicity's discriminatory practices, and reasonable attorneys' fees and costs.

 Six of these plaintiffs claim that solely because they are plaintiffs in this suit to enforce their rights under the antitrust laws against Simplicity, Simplicity unlawfully cancelled its contracts with them for the sale of dress patterns and refuses to deal with them. Plaintiffs P. W. Husserl, Inc., Paul Husserl, House of Materials, Inc. and Smiles Stores moved before me for a preliminary injunction restraining Simplicity from refusing to deal with them. Thereafter two other plaintiffs, C. & R. Grand Stores and D.W. Newfield Company, moved before me for the same relief. All six plaintiffs claim that defendant's refusal to deal with them results in immediate danger of irreparable loss or damage.

 Neither on the argument nor subsequently have any of the parties suggested that testimony should be taken on the motions. Both motions are before me for decision on the extensive affidavits submitted.

 Simplicity is the nation's largest manufacturer of tissue patterns used in the home for making women's and children's wearing apparel. Its volume of sales in terms of units is greater than that of all other major producers combined.

 All of the plaintiffs are small retail stores whose primary business is the sale of yardgood fabrics and notions. Stores in this general category comprise 82% Of Simplicity's customers and account for some 30% Of Simplicity's total sales volume. These stores are primarily interested in selling yardgoods and notions. They handle patters largely as an accommodation to their fabric customers and for the purpose of stimulating their sales of fabrics and notions.

 For some time each of the moving plaintiffs has purchased patterns from Simplicity for resale in their stores under substantially identical contracts which appear to be in the form generally in use by Simplicity for its small store customers. These contracts differ in substantial respects from the arrangements previously made with Simplicity's larger customers who are mostly department and variety stores handling a multitude of relatively low-priced articles.

 Under each of the plaintiffs' contracts Simplicity shipped a complete line of patterns to the retail merchant who paid cash for the patterns so shipped in the regular course. New patterns were shipped each month and three times a year Simplicity would buy back from the retailer patterns which were outmoded. The retailer was obligated to keep a complete inventory. Simplicity furnished catalogues and promotional material to the retailer for which the retailer was required to pay in regular course at stated prices. *fn1"

 The agreements were 'to remain in force for the term of five years from date of acceptance at New York and from term to term thereafter, unless terminated by either party by written notice served sixty days prior to the expiration of the initial or any succeeding term.'

 This action was filed on July 8, 1959. On December 10, 1959 Paul Husserl, P. W. Husserl, Inc. and Smiles Stores, who were then the only plaintiffs in the action, received written notice from Simplicity of the termination of their contracts. The P. W. Husserl, Inc. and Paul W. Husserl contracts were close to the end of the five year term from the date of acceptance. They were terminated effective at the end of the existing term without explanation. The Smiles Stores contract ran by its terms from May 14, 1957 to May 14, 1962. Smiles Stores received the following letter of termination:

 'We refer you to our agreement dated May 14, 1957.

 'You have instituted an action in the United States District Court for the Southern District of New York against Simplicity Pattern Co. Inc. alleging that the terms and conditions of said contract are in violation of Section 13(e) of Title 15 of the United States Code and you contend that the continuing performance of the terms of that agreement by Simplicity Pattern Co. Inc. entitles you to continuing treble damages. Such allegations have been and are denied by Simplicity Pattern Co. Inc.

 'In order to obviate any further issue with respect thereto, we hereby agree that we will repurchase from you your presently existing stock of Simplicity patterns at the cost thereof to you and that we will repurchase from you the pattern cabinet heretofore sold to you at the amount heretofore paid by you to us therefor. Such payment will be made on condition that your pattern stock and pattern cabinet is received at our place of business in Niles, Michigan not later than January 11, 1960 and on further condition that thereupon our contract dated May 14, 1957 shall thereby be terminated.

 'In the event that Simplicity Pattern Co. Inc. shall not have received your pattern stock and pattern cabinet upon the conditions aforesaid on or before January 11, 1960, we hereby give you notice that in order to prevent the possible further accrual of damages we now terminate our contract with you effective as of March 10, 1960. We give you such extended notice of proposed termination of the contract so that you may in the interim time arrange for such other pattern service as you may wish.'

 It may be noted that in the case of the Smiles Stores contract the cancellation was made in the midst of the original five-year term from the date of acceptance and was not a cancellation on notice at the termination of the initial term.

 These three plaintiffs moved to enjoin the cancellation of their contracts upon the theory that cancellation was actuated solely as a punitive measure against them for pursuing their legal rights under the Robinson-Patman Act and as a part of a concerted plan to deter other small stores in similar position from taking such action. ...


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