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March 21, 1978

FUCHS SUGARS & SYRUPS, INC., and FRANCIS J. PRAEL, doing business as LEWIS & COMPANY, Plaintiffs,

The opinion of the court was delivered by: WARD


 At the end of a three-week trial involving 47 witnesses and hundreds of documents, a jury found that defendant Amstar Corporation ("Amstar") had violated § 1 of the Sherman Act, 15 U.S.C. § 1, and was liable to both plaintiffs, Fuchs Sugars & Syrups, Inc. ("Fuchs") and Francis J. Prael, doing business as Lewis & Company ("Prael"). Plaintiffs' claims arose out of Amstar's April 1, 1974 termination of general sugar brokers, including Fuchs and Prael, and the events leading up to the termination. *fn1" The jury awarded Fuchs $80,000 and Prael $70,000; each award will be trebled under § 4 of the Clayton Act, 15 U.S.C. § 15. Amstar now moves pursuant to Rule 50(b), Fed. R. Civ. P., for judgment notwithstanding the verdict on the grounds that:

(1) As a matter of law, plaintiffs failed to prove a combination or conspiracy;
(2) Plaintiffs failed to prove any causal link between the purported violation and injury allegedly sustained by plaintiffs;
(3) As a matter of law, § 2(c) of the Robinson-Patman Act, 15 U.S.C. § 13(c), would be violated by plaintiffs' receipt of brokerage commissions, and as a matter of law, termination of brokerage commissions in order to avoid such violations is a complete defense to this purported Sherman Act § 1 violation.

 Also pending is a fee application under 15 U.S.C. § 15 on behalf of counsel for plaintiffs. *fn2" For the reasons hereinafter stated, defendant's motion for judgment notwithstanding the verdict is denied, and decision on the fee application is deferred until final determination of this case on appeal.

 Amstar sells its sugar to three classes of customers: industrial purchasers such as candy, cookie and soda companies which purchase in bulk quantities approximately 75% to 80% of the refined sugar; grocery chains which purchase approximately 20% of the refined sugar; and institutional purchasers such as restaurants which purchase individual packets and other specialty items for consumption by their individual customers.

 Prior to April 1, 1974, Amstar marketed its sugar to these customers in a number of ways, including use of general sugar brokers, direct sugar brokers and its own sales force. The sole distinction between general and direct sugar brokers is that general sugar brokers simultaneously represent more than one sugar refinery, while direct sugar brokers represent only one. Brokers do not take title to the sugar and do not buy and sell for their own accounts. Rather, they participate in the refiner's initial sale of sugar by functioning as go-betweens who bring together buyers and sellers at terms agreeable to both. *fn3" For this they are compensated by the refiner in the form of commissions for sales of the refiner's sugar. They are never compensated by the customers to whom the sugar is sold.

 For one reason or another, Amstar was not pleased with the use of general sugar brokers as a means of distributing its product and so it decided to terminate them and replace them with direct brokers and Amstar sales people. *fn4" The questions for the jury were whether the terminations were the product of an anti-competitive purpose, whether they had an anti-competitive effect, and, if so, whether the plaintiffs were injured as a direct result of the antitrust violation.

 Amstar argued to the jury that the terminations were motivated by many good business reasons. The jury, however, chose to reject Amstar's argument and to accept plaintiffs' explanation of why the general brokers had been terminated. The theory of plaintiffs' case was that Amstar had a multi-phase five-year plan for the control and eventual elimination of general sugar brokers. The plan culminated in the April 1, 1974 termination of general sugar brokers and their replacement by direct brokers and Amstar's own sales people. According to plaintiffs, this constituted an unreasonable restraint of trade in violation of § 1 of the Sherman Act because it was motivated not by the business reasons Amstar proffered, but by an anti-competitive purpose to suppress particularly price, but also non-price, competition among various brokers.

 Amstar did not object to this Court's instruction allowing the jury to consider, in relation to the purpose and effect of the broker terminations, Amstar's activities leading up to and following the April 1, 1974 terminations. Nor does it now contend that it was error to have so charged. Similarly, Amstar does not appear to explicitly challenge the sufficiency of the evidence with respect to anti-competitive purpose or effect.

 The starting point of this Court's analysis must be a recognition that the standard for granting judgment notwithstanding the verdict is most stringent.

Simply stated, it is whether the evidence is such that, without weighing the credibility of the witnesses or otherwise considering the weight of the evidence, there can be but one conclusion as to the verdict that reasonable men could have reached. [Furthermore] the evidence must be viewed in the light most favorable to the party against whom the motion is made and he must be given the benefit of all reasonable inferences which may be drawn in his favor from that evidence.

 Simblest v. Maynard, 427 F.2d 1, 4 (2d Cir. 1970); 9 C. Wright & A. Miller, Federal Practice and Procedure § 2524 (1971). Moreover, the evidence which must be considered is not all the evidence, but only the evidence favorable to the non-moving party and the uncontradicted, unimpeached evidence unfavorable to the non-moving party, Bigelow v. Agway, Inc., 506 F.2d 551, 554 (2d Cir. 1974); Horowitz v. Anker, 437 F. Supp. 495, 503 (E.D.N.Y. 1977), at least to the extent that the latter comes from disinterested witnesses. Wright & Miller, supra § 2529 at 572-73. But see Simblest v. Maynard, supra at 5 n.3. And "[since] grant of one of these motions deprives the party of a determination of the facts by a jury, they should be cautiously and sparingly granted." Wright & Miller, supra § 2524 at 542. With these principles in mind, the Court now turns to a review of the evidence to determine whether or not there was sufficient proof to justify the jury's accepting plaintiffs' theory.


 There was evidence in the record from which the jury could have found the following facts:

 Sugar refining is, and was during the period in question, an oligopoly industry in which a limited number of smaller firms are dominated by Amstar, which markets Domino brand sugar. In the Northeastern United States, where plaintiffs transacted most of their business and which the parties agreed is a relevant submarket, over 80% of the refined sugar market, which the jury could have found to be the relevant product market, has been controlled by four firms. Of these four firms, Amstar has predominated, and had approximately 45% to 50% of the market share of sales of refined sugar in the Northeast in 1974.

 Plaintiffs' contention that the elimination of the general sugar broker had an adverse effect on intrabrand and interbrand price and non-price competition turns on the peculiar status and function of the general broker. Based on the fact that brokers were compensated by the refiner, Amstar characterized general brokers as merely its agents. In doing so, however, it ignored the fact that inherent in the concept of simultaneous representation of multiple refiners is a disclosed conflict of interest between the "agents" and "principals". Thus, general sugar brokers by definition are independent of, and at times adverse to, the refiners they represent.

 This inherent conflict between "agent" and multiple "principals" is intensified by the method of compensating brokers. Brokerage commissions generally are based upon volume, increasing in proportion to the volume of sugar sold and without regard to the sales price or profit margin to the refiner on the sale. Thus, the usual brokerage compensation scheme contains an incentive for the broker to sell as much sugar as possible, but no incentive for the broker to get the best possible price for his refiner. In fact, if there is any built-in incentive it is for the broker to seek as low a price as the market will bear so as to attract customers away from other brokers and the refiner's own sales people and induce those customers to buy in greater quantity. *fn5" Thus, there is another inherent conflict -- between the refiners' interest in maximized profits and the brokers' interest in maximized sales regardless of the refiners' profit. Furthermore, because other refiners generally compensate brokers in the same manner, the general broker concept contains no intrinsic incentive for the broker to sell the product of any particular principal. *fn6"

 Because brokerage commissions were based on volume of sugar sold there was intense competition among brokers for high volume sales. However, because brokers had no discretion in negotiating price or other terms and no authority to bind the refiner, and were limited to relaying price quotations and other information back and forth from buyer to seller, they had to develop other means of distinguishing themselves so as to compete for more sales. What ensued was broker competition to provide additional services to sugar purchasers, such as distributing free price forecast sheets and other data on the market, or obtaining free or cheaper delivery of sugar, or locating cheaper, or "distress", sources of sugar or introducing cheaper "private label" brand sugar. *fn7" Most importantly, brokers often competed by "shopping" for the lowest price among the refiners they represented. For example, brokers would sometimes inform a small volume purchaser of the price quote that had been given to a larger volume purchaser and thereby force down the price the small purchaser would be willing to pay. Or the general broker, being privy to price quotes from other refiners, might tell Amstar or the prospective purchaser that Amstar's quote was higher than that of a rival refiner and then tell Amstar that it must meet the competitor's quote if it hoped to make the sale. In these ways the general broker created interbrand competition among refiners which had a downward effect on price. At the same time, there was intrabrand price competition between the general sugar broker who sought the most competitive price and the Amstar salesman who generally sought to sell at the list price. The existence of such intrabrand competition is supported by the testimony of Edwin O. Holtz, formerly of Southern Biscuit Co., Howard Tiekert, formerly of Bond Baking Company, and Terrance Webster of Sunshine Biscuit, Inc., who testified to the effect that they generally got lower prices from general brokers than they got from Amstar people or from direct brokers.

 Another avenue of competition brought about by the general sugar brokers was the introduction of private label sugar to the New York metropolitan area grocery market. It was through the efforts of general brokers, particularly Czarnikow-Rionda, that grocery stores were given the opportunity to buy the less expensive private label brands and offer these alongside and in competition with the name brands.

 There was evidence in the record to suggest that it was Amstar's displeasure with these pro-competitive activities of the general brokers that led to their termination. For example, Amstar had communicated to various general brokers on a number of occasions its displeasure with the general brokers' depressing effect on prices. In addition, Amstar documents demonstrate a concern with the destabilizing effect the general brokers had on prices. Furthermore, William P. Cleaver, Vice President of Amstar and President of the American Sugar Division of Amstar, testified in a deposition that the only dissatisfaction with general sugar brokers he remembers having been expressed by Mr. Shanley, Executive Vice President of the American Sugar Division and formerly Vice President of Industrial Sales, had to do with the detrimental impact the general brokers were having on the price Amstar was ...

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