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Copy-Data Systems Inc. v. Toshiba America Inc.

February 15, 1985

COPY-DATA SYSTEMS, INC., AND SYNERGISTICS, INC., PLAINTIFFS-APPELLEES,
v.
TOSHIBA AMERICA, INC., DEFENDANT-APPELLANT



Distributor of copying machines sued manufacturer claiming violations of federal antitrust laws and New York law of unfair competition and contract law. The United States District Court for the Southern District of New York, found a per se antitrust violation. The Court of Appeals reversed, 663 F.2d 405. On remand, the District Court, Richard Owen, J., 582 F. Supp. 231, found for wholesaler on the unfair competition and breach of contract claims, and manufacturer appealed. The Court of Appeals, Winter, Circuit Judge, held that: (1) finding that manufacture tortiously set out to destroy, and did destroy wholesaler was clearly erroneous, and (2) findings of breach of contract and misappropriation of customer lists were also clearly erroneous. Reversed.

Oakes and Winter, Circuit Judges, and Clarie,*fn* District Judge.

Author: Winter

WINTER, Circuit Judge:

This case arises out of a dispute between a manufacturer, Toshiba America, Inc., ("Toshiba") and two wholesale distributors, Copy-Data Systems, Inc. and its wholly-owned subsidiary, Syneregistics, Inc. (collectively, "Copy-Data"). Copy-Data claims, inter alia, that Toshiba tortiously destroyed it as a business. After a bench trial, the district court awarded Copy-Data $680,413.86 in damages and interest, an amount found to be Copy-Data's value as a going business. Noting that our consideration of this case has not been aided by the overly long and unfocused briefs submitted by the parties, we reverse.

BACKGROUND

An understanding of the reasons we reverse requires that we set out in some detail a chronological overview of the history of Copy-Data and its relationship with Toshiba. Appropriate mention will be made whenever facts are disputed.

1968

Copy-Data was incorporated by two copier salesmen in February, 1968, to market copying equipment, supplies, and service at the retail level. Initially, Copy-Data's primary line of copying equipment was Remington Rand, although it sold a number of competing brands during its corporate lifetime. Its primary marketing area was New Jersey. Copy-Data established a fiscal year ending each June 30 for accounting purposes, and during the period between February and June, 1968, lost $3,000 on revenues of $89,000.*fn1

1969

By June, 1969, Copy-Data had expanded its marketing operations into New York City and Connecticut. During the fiscal year ending June, 1969, Copy-Data incurred losses of $64,000 on revenues of $1,120,000.

1970

In January, 1970, Copy-Data raised capital of $458,00 from the sale of common stock to the public. This enabled it to pay off some debts and to have positive working capital for the first time. Nonetheless, it incurred a loss for the year ending June, 1970, of $55,000 on revenues of $1,510,000.

Copy-Data's contacts with Toshiba was considering introducing a coated paper copier into the United States market. In December, 1970, Copy-Data asked Toshiba for an appointment as the exclusive wholesale distributor of Toshiba's coated paper copiers in New Jersey, New York, and Connecticut. Prior to this time, Copy-Data had no experience in wholesaling.

1971

In February, 1971, Toshiba began importing coated paper copiers into the U.S. and appointed Copy-Data as Toshiba's exclusive wholesale distributor in New Jersey, New York, Connecticut, Rhode Island, and Massachusetts, and its non-exclusive wholesale distributor in Maine, Vermont, New Hampshire, and Pennsylvania, Toshiba memorialized this appointment in an internal memorandum and letter, but a written contract was never prepared. The next month Copy-Data incorporated Synegistics, Inc. as its wholly-owned subsidiary through which all wholesale sales of Toshiba equipment were made.

In June, 1971, Copy-Data reported the first of the only two profitable years it ever had, earning $71,000 on revenues of $1,438,000. In November, Toshiba extended Copy-Data a credit line of $50,000.

1972

In March, 1972, Toshiba requested that Copy-Data sell Toshiba equipment at the wholesale level in the "Mid-Atlantic" region. The following month, Toshiba raised Copy-Data's line of credit to $60,000.

In June, Copy-Data reported its second and last profitable year, earning $68,000 on revenues of $2,463,000, and reporting $140,000 in working capital. Included in those figures were Synergistics' earnings of $54,000 on wholesale sales of $765,000, of which $555,000 represented sales of Toshiba equipment.

In September, Toshiba invited Copy-Data into the Chicago area, and in the following month again raised Copy-Data's ...


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