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UNIROYAL, INC. v. JETCO AUTO SERV.

August 23, 1978

UNIROYAL, INC., Plaintiff,
v.
JETCO AUTO SERVICE, INC., Irving Gellar and Marvin Gellar, Defendants. JETCO AUTO SERVICE, INC., Plaintiff-by-Counterclaim, v. INTER-CITY TIRE AND AUTO CENTERS, INC. and Uniroyal, Inc., Defendants-by-Counterclaim



The opinion of the court was delivered by: CANNELLA

After a bench trial on the issue of plaintiff's liability to Jetco Auto Service, Inc. ("Jetco") on the latter's counterclaims, the Court finds that Jetco may recover damages for violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, Section 340 of the New York General Business Law and for common law breach of contract. The other counterclaims are dismissed for failure of proof. *fn1"

This Court has jurisdiction pursuant to 15 U.S.C. § 15, 28 U.S.C. §§ 1331, 1337 and the doctrine of pendent jurisdiction.

 THE FACTS

 Plaintiff Uniroyal, Inc. ("Uniroyal") is a corporation engaged, Inter alia, in the manufacture and sale of automotive tires and tubes in interstate and foreign commerce. Defendant-counterclaimant Jetco is a multi-service center for automobiles deriving its principal revenues from the sale of tires. Defendant Marvin Gellar is the president of Jetco, succeeding his father Irving Gellar as head of the family-owned business. Jetco is located on Route 9 in Dutchess County, New York.

 Jetco began selling Uniroyal tires in the mid-1960's and became a Uniroyal franchise dealer in 1968. Beginning in 1970, Jetco's tire business progressively increased and, in 1972, Uniroyal issued Jetco a franchise for a particular line of tires, called the Zeta Charter. (Jetco's Exhibit 9, hereinafter "JX" 9). Under the terms of the Zeta Charter, Uniroyal agreed not to "deliver Zeta tires to any other retail or wholesale establishment" within the Charter area. Jetco's Charter area was designated as the City and Township of Poughkeepsie. By its terms, the Zeta Charter agreement was valid from March 7, 1972, until December 31, 1973, unless sooner terminated by either party on thirty days written notice.

 In February of 1973, the Uniroyal sales representative whose territory included Jetco, Edward G. Donnelly, informed Marvin Gellar ("Gellar") that Uniroyal was granting a dealership to a tire outlet called Inter-City Tire and Auto Centers, Inc. ("Intercity") to be located also along Route 9, just six miles south of Jetco, in Wappingers Falls, Dutchess County. The close proximity of the two dealerships put them in direct competition.

 Intercity, like Jetco, was a family-owned corporation engaged in automotive services similar to those rendered by Jetco. Its president, Daniel Ginsberg, had prior ties to Uniroyal, having opened a Uniroyal dealership in Shrub Oak, New York in March of 1972 and, at an earlier period, having sold Uniroyal tires in New York City. Daniel's brother, Stanley Ginsberg, was also a Uniroyal dealer.

 Marvin Gellar expressed his concern to Donnelly about loss of sales to Intercity's Wappingers Falls store but was assured that Jetco would be treated equally with Intercity and that there was enough business for all. After an unexpected delay, caused by the roof's collapse during construction, Intercity's Wappingers Falls store opened in October 1973 and was then issued a Uniroyal Zeta Charter. Intercity's Zeta Charter area included part of the Township of Poughkeepsie, since its northern boundary was the City of Poughkeepsie.

 Mr. Donnelly's assurances to Gellar proved ineffectual. Uniroyal granted Intercity special discounts, allowances and other services, in violation of its own policies and regulations, that were neither offered nor available to Jetco. Moreover, Intercity's "Grand Opening" advertisements offered a special on "blem" tires *fn2" that Jetco also had requested but had been unable to obtain.

 In order to compete effectively with Intercity, Jetco reduced its prices and commenced open competitive advertising with Intercity. Jetco and Intercity advertised the same tires and services in the same newspapers, sometimes on adjacent pages. The advertisements were directed at the same persons throughout Dutchess County because both dealerships sought customers from the same geographic area.

 Seeing Jetco's prices fall below those of Intercity, Daniel Ginsberg complained to Donnelly. Donelly assured Ginsberg that nobody was getting better prices on tires than Intercity. According to Robert Sullen, manager of Intercity's Wappingers Falls store, Donnelly told him he had spoken to Marvin Gellar about the low prices and also had brought the information to the attention of Uniroyal's district sales manager F. G. Sears. Except for the Zeta tire prices, Jetco kept its prices below those of Intercity.

 In November of 1973, Donnelly and Sears visited Jetco to discuss the Intercity-Jetco situation. According to Gellar, Sears threatened him with product shortages and loss of dealership unless Jetco raised its prices. Shortly thereafter, Donnelly visited Gellar just after leaving Intercity's Wappingers Falls store. Donnelly told Gellar that Intercity would raise its prices one dollar if Jetco agreed to raise its prices two dollars.

 When nothing came of this last incident, Donnelly's regular visits to Jetco ceased until late January 1974. It was at that time that Gellar was advised of Uniroyal's decision to terminate Jetco as a Uniroyal dealer. When asked the reason for such action, Donnelly mentioned "customer complaints" but was unable to give Gellar any details. Gellar had never been advised of customer complaints serious or numerous enough to cause the termination of his dealership and had not been given the opportunity to cure or disprove these purported complaints.

 Gellar immediately telephoned Sears hoping Uniroyal would reconsider its decision. Sensing that the Intercity-Jetco price was the actual reason for Jetco's termination, Gellar offered to meet with Daniel Ginsberg to try to work something out. Sears indicated that it was too late. Gellar followed up his telephone call with a mailgram to Sears, again pleading for a change of heart on Uniroyal's part. Sears responded by letter that the decision to terminate Jetco still stood and that the cancellation papers were being prepared.

 Uniroyal instituted suit in this Court against Jetco for goods sold and delivered amounting to $ 23,342.48. In the Pretrial Order, dated February 10, 1978, Jetco acknowledged its indebtedness to Uniroyal of this sum. *fn3" Uniroyal also sued Irving and Marvin Gellar as guarantors of Jetco's obligations. Jetco counterclaimed for damages, based upon violations of Sherman Act § 1, 15 U.S.C. § 1, Robinson-Patman Act § 2(a), (d), (e), 15 U.S.C. § 13(a), (d), (e), the Donnelly Act, N. Y. Gen. Business Law § 340, and common law wrongs, and impleaded Intercity alleging a conspiracy with Uniroyal in violation of state and federal antitrust laws. On May 4, 1977, Jetco discontinued its counterclaims as to Intercity only. In March 1978, the issues involving Uniroyal's liability to Jetco on the counterclaims were tried to the Court.

 DISCUSSION

 The Court has determined that Jetco may recover treble damages for Uniroyal's violation of Sherman Act § 1, 15 U.S.C. § 15, and may recover damages on its Donnelly Act claim and its breach of contract claim. Jetco may not recover for Uniroyal's violations of the Robinson-Patman Act due to a failure in proof of the fact of injury causally connected to the alleged wrongs.

 The Sherman Act § 1 Claim

 Congress has declared illegal "(e)very contract, combination . . ., or conspiracy, in restraint of trade or commerce . . . ." 15 U.S.C. § 1. Section 4 of the Clayton Act provides a private right of action with recovery of treble damages for "(a)ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws . . .." 15 U.S.C. § 15.

 The Court finds that Uniroyal violated Sherman Act § 1 when, in response to complaints from Intercity, Uniroyal threatened Jetco to raise its prices and then made good on its threats by terminating Jetco's dealership. Jetco may recover treble damages under Clayton Act § 4 because it proved damage to its business caused by loss of the Uniroyal franchise.

 The evidence of interaction among Uniroyal, Jetco and Intercity is largely uncontradicted. Uniroyal admits that Daniel Ginsberg and Robert Sullen complained about Jetco's prices to Sears and Donnelly following the opening of the Wappingers Falls store and that, thereafter, Sears and Donnelly discussed Jetco's prices with Gellar. Uniroyal denies it ever asked Jetco to raise its prices, threatened Jetco with termination if it failed to do so or, finally, terminated the franchise ...


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