Appeal from a judgment for plaintiff based upon a jury finding that defendant had conspired to restrain trade in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. The Court of Appeals held that there was insufficient evidence of a combination or conspiracy under Section 1 and accordingly reversed.
Before Lumbard, Moore and Mansfield, Circuit Judges.
Two sugar brokers, Fuchs Sugars & Syrups, Inc. ("Fuchs") and Francis J. Prael ("Prael") brought this action in the Southern District of New York against the Amstar Sugar Corporation ("Amstar"), a large sugar refiner, alleging antitrust violations under Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. The suit was triggered by Amstar's decision in 1974 to terminate the services of Fuchs and Prael as its general sugar brokers.
At the conclusion of a three-week trial before Judge Ward, the jury found that Amstar had conspired to restrain trade in violation of § 1 of the act. With respect to § 2, the jury found that Amstar had not attempted to monopolize the sugar market. The jury awarded damages totaling $150,000 before trebling by the Court. The Court denied plaintiffs' request for an injunction compelling Amstar to reinstate them as its general sugar brokers.
After the verdict, Amstar moved for judgment n. o. v. on the § 1 claim on the ground that there was no evidence of a combination or conspiracy. Judge Ward denied the motion in an opinion reported at 447 F. Supp. 867 (1978). Amstar now appeals from the judgment entered on the verdict. Plaintiffs have cross-appealed the denial of their motion for injunctive relief.*fn1
On appeal, Amstar argues that even if a corporation can conspire with its own agents in violation of § 1, plaintiffs introduced insufficient evidence to support a jury finding that there was such a conspiracy. We agree and therefore must reverse the judgment and dismiss the complaint. The record before us shows no more than a unilateral decision by Amstar to substitute one distribution system for another. It does not show a conspiracy with anyone, as the following recital of the facts discloses.
Large food manufacturers often distribute their product through a network of geographically dispersed commission agents called brokers, who normally represent several manufacturers at a time. Reliance on these brokers avoids the greater expense of employing full-time salaried sales personnel in each location where the product is sold.
These food brokers act as the manufacturers' agents in negotiations with wholesalers. As agents, the brokers do not purchase or take possession of the manufacturers' goods, bear any of the financial risk for these goods, or possess any discretion as to the pricing of the goods. Rather, their function is simply to bring a buyer and seller together in the hope of initiating a sale at a price and on terms agreeable to both.
Sugar refiners employ a network of brokers of the foregoing type, known as sugar brokers, to market their product to the wholesalers. These brokers are either direct or general brokers. The general broker acts simultaneously as an agent for more than one sugar refiner while the direct broker represents only one such refiner.
Amstar is the largest refiner of sugar in the United States, selling its product to three classes of customers: industrial purchasers, grocery chains, and institutional purchasers. Until it reorganized its distribution process in March of 1974, its marketing procedures included the use of general sugar brokers, direct sugar brokers and its own sales force.
For many years, the appellees, Fuchs and Prael, acted as general sugar brokers for Amstar from their principal offices in the New York area. In their capacity as Amstar sales agents, however, their authority was extremely limited. They were permitted only to quote to potential customers sugar prices which were fixed by Amstar; they possessed no pricing authority themselves. Any orders placed by customers with the brokers were subject to final approval by Amstar. Once approval was obtained, the sugar would then be shipped by Amstar directly to the customer and Amstar would bill the customer. The brokers neither took possession of nor title to the sugar and were compensated only by Amstar, on a commission basis, for their services in initiating the sale.
Although acting as sales agents for Amstar, Fuchs and Prael, together with Amstar's other general sugar brokers, engaged in certain practices on behalf of Amstar's customers which at times affected the price paid for Amstar sugar. This conduct included: making recommendations to customers regarding the position (i. e., the quantity, price and terms for sugar) they should take in the market; shopping among the various sugar refiners for the best price for sugar buyers; obtaining from Amstar special prices and terms for certain customers; and giving customers information concerning the prices and terms being offered by Amstar to other customers. In short, while the general brokers were, in principle, agents of Amstar, they at times acted more nearly as purchasing agents for Amstar's customers. Their conduct, moreover, often had the effect of reducing the price of Amstar sugar and Amstar's profit margin.*fn2
As a result, Amstar began to move away from the use of general sugar brokers. By 1969, only about fifteen general brokers were still employed by Amstar. Finally, on March 22, 1974, Amstar announced to all of its remaining general brokers that it would terminate use of their services on March 30. Thereafter, some of the general brokers were offered positions as direct brokers from Amstar. While some rejected the offer, two general brokers, Kenneth Fox and George Waller, agreed to forego representation of other sugar refiners to act as sugar brokers exclusively for Amstar.*fn3 Amstar offered the terminated brokers a voluntary termination payment. The payments were made in exchange for general releases executed by the brokers. Thirteen brokers accepted the payments and executed releases. Only the plaintiffs, Fuchs and Prael, refused the payments and commenced this suit.
Plaintiffs charge that Amstar's decision to terminate its use of general brokers and to negotiate the sale of its product exclusively through direct brokers or its own sales personnel was the product of a conspiracy in restraint of trade. They charge that the terminations were part of a plan by Amstar to deprive its customers of the market information and competitive assistance supplied by the general brokers. This competitive assistance, plaintiffs argue, often enabled Amstar customers to purchase sugar at a price below that which Amstar had originally quoted. Plaintiffs conclude that the terminations were anti-competitive and in restraint of trade. In addition, plaintiffs contend that to implement successfully its new distribution system Amstar conspired with its own general and/or direct brokers. They cite as evidence of conspiracy that after the general brokers were notified of the terminations, two of them agreed to become direct brokers for Amstar and 13 former Amstar brokers acquiesced to their terminations by accepting the voluntary termination payments. Plaintiffs also focus on the fact that from 1972 to 1974, Fuchs agreed to ...