Edwin M. Reid, Doing Business As College Book Exchange v. Harper & Brothers, 235 F.2d 420, 2d Cir. (1956)
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Scribd Government DocsEdwin M. Reid, Doing Business As College Book Exchange v. Harper & Brothers, 235 F.2d 420, 2d Cir. (1956)
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Scribd Government Docs235 F.
2d 420
Edwin M. REID, doing business as College Book Exchange,
Plaintiff-Appellant,
v.
HARPER & BROTHERS, Defendant-Appellee.
No. 217, Docket 23849.
United States Court of Appeals Second Circuit.
Argued Jan. 18, 1956.
Decided July 30, 1956.
Edgar Hills (of Campbell & Hills), New York City, Thurman Arnold,
Norman Diamond (of Arnold, Fortas & Porter), Washington, D.C.,
Edward G. Harris (of Harris & Sell), Toledo, Ohio, for plaintiff-appellant.
Alexander S. Andrews, New York City (Horace S. Manges, Jacob F.
Raskin, Ira M. Millstein, Weil, Gotshal & Manges, New York City, of
counsel), for defendant-appellee.
Before MEDINA, HINCKS and WATERMAN, Circuit Judges.
WATERMAN, Circuit Judge.
Plaintiff, Edwin M. Reid, doing business as The College Book Exchange,
brought this action under 2(a) of the Clayton Act, as amended by the
Robinson-Patman Act, 49 Stat. 1526, 15 U.S.C.A. 13(a), alleging that
defendant, Harper & Brothers, had violated the Act by charging him higher
prices for its books than it charged his competitors, thereby rendering him
unable to compete in the sale of Harper's books. Treble damages were sought
pursuant to Section 4 of the Act, 15 U.S.C.A. 15. He appeals from a judgment
against him entered upon a jury verdict for the defendant and from the denial of
his motion to set aside the verdict and grant a new trial.
Plaintiff is engaged in the sale of books in Toledo, Ohio. The defendant is a
book publisher in New York City. During the ten year period from 1941 to
1950, plaintiff's total purchases from defendant amounted to $46,396.83, or
approximately 3 1/2% of his purchases from all publishers. The aggregate
difference in prices charged plaintiff, as compared with those paid by plaintiff's
alleged competitors, was claimed to be $4,101.57, or an average of $410.00 a
year. Plaintiff alleged that he was in competition with eight firms that acted as
defendant's wholesalers, distributing books for defendant in various locations
throughout the United States. Harper & Brothers conceded that its prices to
Reid were higher than to several of its other customers during the period in
question. The defendant sought to justify this disparity, however, on the basis
of differences in cost between its sales to Reid and its sales to the other named
customers. The relevant section of the Act authorizing such a defense provides
'That nothing contained (herein) * * * shall prevent differentials which make
only due allowance for differences in the cost of manufacture, sale, or delivery
resulting from the differing methods or quantities in which such commodities
are to such purchasers sold or delivered * * *.' 49 Stat. 1526, 15 U.S.C.A.
13(a). Harper contended that the total difference between the prices it charged
Reid and those that he would have paid if treated like the other purchasers
amounted to $3,211.00. It then introduced the testimony and report of an
independent accountant in order to justify this differential. The accountant had
prepared a detailed comparison between 'billing, bookkeeping and shipping'
costs on transactions with Reid and transactions with three of its largest jobbers.
This cost study indicated a saving of $1,430.00 in dealings with the latter. In
addition, the defendant testified to further cost savings, attributable to the
purchasing patterns of the three jobbers and from the elimination of certain
collection expenses incurred in dealing with plaintiff. These items were
characterized as 'intangible' during the trial. In addition to testimony concerning
general production economies, there was evidence that the plaintiff, in contrast
to the three jobbers, was on occasion dilatory in paying his bills.
3
The trial judge properly left to the determination of the jury, as questions of
fact, whether plaintiff was in competition with the favored purchasers, whether
plaintiff was the victim of discrimination, and whether the effect of such
discrimination, if any, was to injure the plaintiff's ability to compete with the
other purchasers. Only if the jury be considered to have answered each of these
questions in the affirmative, do we reach the questions raised by this appeal
which are concerned primarily with the cost justification defense. Plaintiff also
claims reversible error because of an alleged prejudicial comment of the trial
judge on the evidence.
In connection with the cost justification defense, plaintiff contends that the trial
judge improperly charged the jury in three respects, which will be discussed
seriatim.
First, plaintiff alleges that it was error for the court to permit the jury to
consider the 'intangible cost savings,' claimed by defendant, incident to book
production and to the collection of bills. Although price differentials ought to be
justified by concrete and specific evidence of cost variances in dealing with
different purchasers, and not by conjectural accounting estimates alone,
Automatic Canteen Co. v. F.T.C., 1953,346 U.S. 61, 68, 73 S.Ct. 1017, 97
L.Ed. 1454, it was not error to allow the jury to consider this evidence. The trial
court pointed out the failure of defendant to introduce precise data, and properly
discounted the weight of this evidence by adverting to 'these intangible
elements' as being the proper subjects of consideration only 'for what they are
worth.'
Second, plaintiff also alleges error in that part of the charge concerning the
validity of the accounting procedure embodied in defendant's cost study. Since
Harper had no relevant cost records for the period of 1941 to 1950, the
accountant hired to prepare the study used figures for 1951, adjusted backwards
on the basis of general salary rates published by the Commerce and Industry
Association of New York. Although such an accounting method obviously
lacks the full measure of desired precision, it appears to have been undertaken
in good faith and to accord with the minimal requirements of sound accounting
principles. Indeed, under the circumstances, it appears to have been the best
available procedure. Both the courts and the Federal Trade Commission have
recognized the dilemma confronting defendants in suits such as these, and have
liberally accepted data derived from litigation-inspired accounting methods.
See e.g., American Can Co. v. Russellville Canning Co., 8 Cir., 1951, 191 F.2d
38, 59, and In re Minneapolis Honeywell Regulator Co., 1948, 44 F.T.C. 351,
394. Moreover, the trial court correctly charged the jury that it was 'up to you
as to whether you wish to accept or reject the assumptions made by Gayle
(defendant's accountant) and the conclusions which he drew from them.'
A further contention of plaintiff is that the court erred in refusing to charge that
defendant's cost study improperly calculated comparative costs for plaintiff and
defendant's three largest jobbers, by averaging total shipments on a cumulative
basis for an entire year. The complaint is that this approach uses savings
realized on large transactions with the favored customers to justify
discrimination in their favor on transactions involving smaller quantities,
equivalent to plaintiff's purchases. To require a seller in these circumstances to
justify the cost differential in each and every transaction with his buyers, rather
than on the aggregate basis of their dealings, would prove unduly onerous. The
impact of such a requirement might be to discourage all price differentials, even
those actually justified by cost distinctions. Absent a showing that the lack of
uniformity in the price spread had any competitive significance, the FTC has
permitted the use of aggregate cost differences to justify price differentials. See,
e.g., In re Sylvania Electric Products, Inc., 1954, FTC Docket No. 5728, 3 CCH
Trade Reg. Rep. P25,181. Such a method was permissible in this case.
Furthermore, the trial court left the ultimate validity of this computation to the
determination of the jury.
8
Third, plaintiff alleges that the court erred in charging the jury that it could
deduct pro tanto from the amount of damages, if any, the extent of saving
resulting from the transactions with the favored customers. Although one court
has approved this partial justification approach, see American Can Co. v.
Russellville Canning Co., 8 Cir., 1951, 191 F.2d 38, 56, it is not necessary for
us to consider its validity since the jury returned a verdict in favor of defendant
and therefore never reached the question of the measure of damages.
With respect to the alleged prejudicial comment, the plaintiff claims that the
trial court in his charge to the jury unduly emphasized a letter written by
plaintiff to his creditors shortly after a fire had destroyed his office building.
The letter indicated that plaintiff was unable to pay his debts at that time
because all available cash, including insurance proceeds, was being used to
convert the building into an apartment house. The trial judge alluded to this
letter in respect to its bearing on the plaintiff's credibility as a witness, since it
contradicted his oral testimony. Plaintiff's testimony was an essential ingredient
of his case, as evidenced by his appearance on the witness stand on five
successive days, and it was not error for the court to advert to that evidence.
Great discretion is accorded federal judges in commenting on portions of the
evidence, and even in expressing opinions with regard thereto, provided it is
stated that the jury is the exclusive judge of the facts and need not adopt any
opinion expressed. Quercia v. United States, 1933, 289 U.S. 466, 469-470, 53
S.Ct. 698, 77 L.Ed. 1321; Pager v. Pennsylvania Rail Co., 2 Cir., 1947, 165
F.2d 56, 58; Flint v. Youngstown Sheet & Tube Co., 2 Cir., 1944, 143 F.2d
923, 925. These precautions were observed by the court. Furthermore, the trial
judge properly informed the jury that the plaintiff's motive for bringing the
action had absolutely no bearing on his rights under the Robinson-Patman Act,
but was relevant only to the extent that it bore on his credibility as a witness.
10
Since the trial court did not err in its instructions to the jury, but rather left to it
the determination of all issues of fact after proper instructions on the law, the
judgment below must be affirmed.
11
Affirmed.
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