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February 4, 1970

National Dairy Products Corporation et al., Plaintiffs,
Milk Drivers and Dairy Employees Union, Local 680 et al., Defendants

Frankel, D. J.

The opinion of the court was delivered by: FRANKEL


The dispute before the court concerns the question whether a restriction in a collective labor agreement, as it has been authoritatively construed and enforced by an arbitrator, should be held illegal under the antitrust laws. Agreeing that the material facts are undisputed, both sides have moved for summary judgment. Their situation and the court's decision are as follows:


 Plaintiff National Dairy Products Corporation (re-named Kraftco Corporation after it filed this lawsuit) manufactures and distributes ice cream, milk and related products through its Sealtest Food Division. Among its installations in many States, it has an ice cream manufacturing plant in Long Island City, New York. Until some time in 1968 it had another such plant in Newark, New Jersey, but that was replaced by a distribution center in Edison, New Jersey, which now distributes in Northern New Jersey some of the ice cream made in Long Island City.

 The two defendant Locals of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America represent the Sealtest employees in the Long Island City plant (Local 757) and the Edison distribution center (Local 680). Sealtest and other ice cream manufacturers in the "Metropolitan Area" (as hereinafter defined) have made collective labor agreements with defendant unions containing the following provision, which is the source of the present controversy:

"The Company agrees for the term of this Agreement not to remove its manufacturing operations from the area of Local 757, Local 680, and to continue to manufacture within the area of Local 757, Local 680, and the Company, including any affiliates or subsidiaries, agrees that it shall not establish or operate a plant for production of ice cream or frozen dessert products outside of the Local 757, Local 680, area for sale or distribution of such products in the Metropolitan Area; however, nothing herein shall restrict a company which formerly manufactured under contract with Local 757 or 680 from resuming such manufacturing under contract with said Local for distribution in its area."

 Elsewhere in the essentially identical agreements, the "Metropolitan Area" is defined as consisting of "the City of New York, the Counties of Nassau, Suffolk, Westchester and Rockland in the State of New York, and the Counties of Union, Essex, Bergen, Hudson, Passaic, Middlesex, Ocean, Somerset, Morris, Monmouth, Hunterdon, Sussex and Warren, in the State of New Jersey."

 Plaintiff Scooper Dooper, Inc., through its division known as Dari Farms, distributes a variety of ice cream products, purchased by it from several manufacturers, in New Jersey, Delaware and Pennsylvania. Sealtest, through its plant in Philadelphia, is one of the Dari Farms suppliers. It is among the undisputed facts that, as the complaint alleges (par. 18), "the labor contracts between Dari Farms and Sealtest, respectively, and the local Unions in the Philadelphia area do not provide for terms and conditions of employment equal to or better than the requirements of the labor contracts between Sealtest and defendants."

 During 1968 some of the products acquired from Sealtest's Philadelphia plant were sold by Dari Farms to stores in a chain of supermarkets at locations within the State of New Jersey but outside the Metropolitan Area as defined above. Early in 1969, Dari Farms obtained an order from the same chain to supply 12 of its stores within this Metropolitan Area. It proceeded to do so, again with products manufactured by Sealtest in Philadelphia.

 Upon learning of the sales to these 12 stores, defendant unions protested to Sealtest that this violated the contractual prohibition, quoted earlier, against "production * * * outside of the * * * area for sale or distribution * * * in the Metropolitan Area * * *." Sealtest countered that the restriction applied only to sales by Sealtest itself, and that the unions' broader construction would render the agreement void for conflict with the antitrust laws. The dispute was laid before an arbitrator, who ruled in the unions' favor. He found the contractual language "abundantly clear and express of purpose," and concluded "that the Company's action of supplying ice cream products from its Philadelphia plant for delivery in the Metropolitan Area violated" the agreement. He ruled that the disputed clause disclosed "readily the parties' intent to protect the achieved labor standards by preventing the importation of ice cream products into the Metropolitan Area from other areas where lower labor standards prevail." He ordered Sealtest, inter alia, to "cease and desist forthwith from supplying products from its Philadelphia plant to Scooper Dooper, Inc. * * * for delivery into the Metropolitan Area." Rendering his award as a matter of contract interpretation, he explicitly refrained from ruling upon the Company's antitrust argument. This, he concluded, is an issue "far more appropriate for the courts to decide."

 Plaintiffs lost no time in pursuit of the course thus indicated. Promptly after the arbitrator's award, they filed the present suit seeking a "judgment declaring the contracts between the Sealtest Foods Division of National Dairy Products Corporation and the defendants illegal, null and void to the extent that they would require enforcement of the arbitration award * * * and declaring said award null and void * * *." The resulting issue of law comes to the court in an uncommonly "pure" condition. Not only are the facts undisputed, but it seems clear, and equally undisputed, that the meaning of the contract provision in question has been settled for us by the arbitrator's award. However the court might have viewed it as an independent matter, the agreement has been held authoritatively to forbid the supplying of Dari Farms from Sealtest's Philadelphia plant for sales in the Metropolitan Area. Cf. United Steelworkers of America v. American Mfg. Co., 363 U.S. 564, 568, 4 L. Ed. 2d 1403, 80 S. Ct. 1343 (1960); United Steelworkers of America v. Enterprise Wheel and Car Corp., 363 U.S. 593, 596, 4 L. Ed. 2d 1424, 80 S. Ct. 1358 (1960). The sole question remaining is whether the contract, as thus construed, is illegal under the antitrust laws. For reasons which follow, the court reaches a negative answer to this question.


 Plaintiffs' main contention, as they state it, is "that a per se violation of the antitrust laws would occur if Sealtest were to abide by the Arbitrator's decision." The basis for the argument is United States v. Arnold Schwinn & Co., 388 U.S. 365, 18 L. Ed. 2d 1249, 87 S. Ct. 1856 (1967), from which plaintiffs quote as follows:

"* * * where a manufacturer sells products to his distributor subject to territorial restrictions upon resale, a per se violation of the Sherman Act results. And, as we have held, the same principle applies to restrictions of outlets with which the distributors may deal and to restraints upon retailers to whom the goods are sold. Under the Sherman Act, it is unreasonable without more for a manufacturer to seek to restrict and confine ...

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