Petition for Writ of Certiorari — Dayton Rubber Co. v. Cordovan Associates, Inc.

Supreme Court brief1960

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Supreme Court vf the United Stites

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No,

Dayron Repoen Company. Petitions y *

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CORDOVAN Associates, Dconporsrrep

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

By THE SIXTH CIRCUIT

Pita ()) kBeL ING

Pie KREL, SCHAEFER AND Epprine.

Phivd National Bark Poruildanre

Davton, Ohio .

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Shereham Biaaiding

Washineton, DO «,

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Patess or 3veox S. Adams. Wasnincion, D.C

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INDEX -

° Page

Opinien below ....... es eeercece peso CeeENeeresecete -1

GRE AE EEE ARO 2

Question presented .............6.ccceces sadadidena” i

“Rule Teg ol ew 8

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Reasons for granting the writ ...................... x

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CITATIONS

CASES: "

Bishop v. United States, 223 F.2d 582, 390 U.S. 96] &

Central Ry. Signal Co. v. Letelen, 194 F. 2d 310 ...9, 10

Chicago, Burlington & Quincy R. Co: v. Dnited States,

SE iinet ccecccdddendnuensaeees 9

Coleman v. Sears, Roebuck & Co., 238 F.2d 206 . 4)

CLR. vy. Consolidated Premium Iron Ores, Limited,

i tin ndedeneveeneocens amen 10, 11

Commissioner v. Duberstein, — U.S. — (decided June

Dt Miievi cit eciihe ene anes bandas de 11, 12,15

Dixie Sand & Gravel Corporation vy. Holland, 255 F.

Dt titenscsvtenehecadnedéumentecccennocene 11

Graver Tank Co. v. Linde Air Proawcts Co., 339 US.

Dt tectcienkusnsatee dan ToVC so cccccceseccvcess 11, 15

Gudgel v. RE aME ED » cccnscctnadcccsuces 11

r Hycon Manufacturing Co. v. H. Koch & Sons, 219 F

ie ee eh ae ak CE a cus Lopesnnes 9

Kaye v. Smitherman, 225 F.2d 583 ......5 00.0... i)

a iid

ee -

y ]

, Index Continued :

° Page

devaft Foods Company v. CAR. 232 F. |. ee 9

Letcher County v Dekoe, Ve Lf A. C6 11

McAllister v. U niled State * 2 | Say 10, 11

Rich v. Pappas, 229 F.2d ge SESS 11

. Seagrare Corp. v. Mount, 232 FP. 2d 389.2... 66-6 -- 9,11

BE. H. Sheldon and Co. vy. R., 914 F.2d G55 ...... 1]

Stevenot v. Norberg, 210 F. 2a" 615 Bs LES = i)

Teras Co. ¥. R.O "Brien Co... BB TB BUSS .ccccces i)

United States v. Allinger, 975 4 J rer 11

United States vy. One 1950 Buick. Sé&yn, 231 F. 2d 2

United States v. United States Gyps

eeriadeepheeepitiges: ~ ASO, 11, 12, 15

of ORE MOA A | ee eee eee 11

ae LA fr Seren Sere 10

Wright v. C LR., CITE Se 10

Junker vy. C.LR., 256 F. 2d 190-35. Sinetactesaaees 10,11.

Reu:* . ° ° | ‘wa

Rule 52, Federal Rules of Civil Procedure U.S. >

FS eee eee eeeeee eens éeawe 2, 3,7, 8, 10, 16

P an — —_ — a4

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IN THE

_ Supreme Court of the Anited States

Oc = T ERM, 1960

No.

, ————— \ Sf

— y

AyYTON RupBer Company, Pé?titioner

7 -—

CoRDOVAN ASSOCIATES, INCORPORATED

PETITION FOR A WRIT OF\CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

, THE SIXTH CIRCUIT

( |

—_

\Patitioner, The Dayton Rubber Company, \prays

thatp writ of certidrari issue to review the judginent

of the Court of Appeals for the Sixth Cireuit entered

in the above entitled case on June 6, 1960.

OPINION BELOW a

The District Court did not render an opinion. Its A

findings and conclusions were entered on May 6, 1956

(Appendix A, infra, pp. la-Jla) and, its order of |

deela ratory judgment was filed June 8, 1959 (Appendix, > |

1S, infra, p. 12a). The opinion of the Cireuit Court

of Appeuls (Appendix C, infra, pp. 13a-17a) is not yet ’

reported,

JURISDICTION

Yhe judgment of the Court of Appeals was entered

on dune 6, 1960° (Appendix D, infra, p. Wa). A

timely petition for a rehearing was denied on July of

1960. The’ jurisdiction of this court is invoked under

28 U.S.C. 1254(1).

QUESTION PRESENTED o

This was an action for a declaratory judgment

instituted by the Dayton. Rubber Company against

Cordovan Associates, Incorporated, .to resolve the

_______ question of whether or not Dayton, by reason of its

contract. with Cordovan, was required to accord to

approved distributors of Cordovan, for the period from

June 1, 1958 to the termination of the contract on -

October 31, 1958, the same prices that it acecrded te

its other chain store ‘customer, White Stores, Ine.

After a non-jury trial of two weeks duration, the trial

judge held that Dayton was not so required. In the

course of detailed findings, the trial judge found that:

There was no provision, either o1 rea@pritten,

- nor were there facts from whicl erence

could be drawn, that Cordovan prices were to be

* tied fo White prices under all circumstances.

The Court of Appeals reversed the judgment of the

trial court because it disagreed with that finding. It

held that this was an inference or con¢lusion drawn

frem the facts with which it was free to disagree

- wninhibited by the clearly erroneous test of Rule 52

of the Federal Rules-of Civil Procedure, 28 U.S.C.A.,

following 723(¢). :

erred.in failing to apply to the finding above mentioned

the clearly-erroneous test of Rule 52.

-_-—- . ——

os 3 .

| RULE INVOLVED —

° Rule-52 of the Federal Rulessof Civil Procedure

[28 U.S.C.A.] provides in part as follows:

(a) Errects In-athactions tried upon the facts

Without a jury or with an advisory jury, the court

‘Shall find the facts specially and state separi: ély

its conclusions of law thereon and direct the

entry of the apprepriate judgment ; and in grant-

ing or reftising interloqutory injunctions the

court shall. similarly set forth the findings of fact

and conclusions of law Which constitute the

grounds of its action. Requests for findings are

not neeessary for purposes of review, Findings

of fact shall not be set aside anless cleaady

erroneous, and due régard shall be given to the

opportunity of the, trial court -to judge of the

credibility of the Witnesses. ¢

STATEMENT |

‘The Dayton Rubber Company, petitioner herein ir

an Ohio corporation. It is a manufacturer, among

other things, of automobile tires and tubes. On

November 1, 1956, it entered into a contract with

| Cordovan Associates, Incorporated, a «Virginia cor-

' poration, under which it agréed ‘to manufacture and

sell to customers’ approted hy Cordovan . Associates

tires amd tubes bearing the brand name ‘ Cordovan.

Cordovan’s approved customers were chain store

operators of automotive retail businesses located

thronghaut a large area of the United States. The

contract was for a term of two years (November 1,

1956, to October 31, 1958), and required ‘that Dayton

sell Cordovan brand tires Aid tubes to the approved

distributors at prices ‘““*prevarling on date: of ship-

ment.’* Sales were made to the various, Cordovan

distributors until the termination of the contract on

@ « *

October 31, 1958. However, a dispute. arose as to the

prices Dayton ‘could properly charge the Various

distributors for the items sold to thém’ during the

period = from June 1,, 1958 tS October 31, 1958.

Cordovan contended that the phrase ‘‘prices pre-

vailing on date of shipment’? entitled its distributors

to the same prices Dayton charged its other chain

store customer White Stores, Inc. Dayton contended

that ‘yfices prevailing on date of shipment’? refer-

enced a pricing formula and that it was free to enter

into a new contract with White Stores without being

under obligation toxenter into a similar contract with

Cordovan. Since there were numerous Cordovan dis-

tributors located in sevéral differént jurisdictions

who owed Dayton large sums for tires and tybes

‘sold ta them during tle period in question, Dayton,

> to avoid-a multiplicity of suits, brought an action “for

a declaratory judgment to obtain a eonstruction—~of

the contract and a decision as to the rights and

obligations of the parties under it.

After a pon-jury trial of two weeks’ duration, the

trial judge made dethiled findings of fact and entered

judgment in favor of Dayton coneludiny that the

prices charged Cordovan distributors. by thé rubber

company. Were préper and in accordancé with the.

contract between Dayton and Cordovan.

In brief, the trial judge found that from 1947 to

1956, the Dayton Rubber Company hadsold tire easings

and tubes through its thain store division to poth

White Stores, Inc., and the approved distributors of

Cordovan Associates bilimg them on an_ identical

“cost justification basis,’’ though it had no written

contract with eifher customer (Apdx. 3a). - Fluctua-

tions in prices, Which generally came aboutsquarterly,

‘

® |

_. follows :

oe 5

- : , |

Were applied uniformly and? identically to: shipments

going to both customers (Apdx. 3a).

In 1956," Dayton entered ‘into. a written contract

with White Stores, Ine., for’the sale of such tires-rid

tubes. This contract‘was for a ternt of thice years,

commencing August 1, L956 (Apdx. 4a). Thereafter,

on November 1, 1956, it entered into-a similar con-

tract with Corgovan Associates for a term of two

years (Apdx. 4a). The contract with * Cordovan

‘contained the following paragraph with regard to

prices for tires and tubes purchased pur@iant to such

” P ‘e q

contract : ) °

9. Price. Supplier will invoice buver’s associates

and approved ‘distributors for Cordovan brand

casings and tubes purchased hereunder at prices

‘ prevYailing on date of shipment. Such prices are

subject to addition, of any and all excise. sales, or

manufacturer’s tax levied by lawfukuthority on

the merchandise purchased under this contract.

The corresponding provision in the White contract

‘found (Apdx. 4a) that in fact the prices charged the

dJwo customers on sales subsequent 40 the written cou.

étracts continued to be identical for the same kind,

quality and size of tires and tubes (Apdx. 5a).

The trial judge also found that for the fiscal vear

ending October 31, 1957, there was established and

"The cotrespondiQy provision in the White contract read as

“). Prices. Supplier will invoice Buyer and approved dis-

tributors for Whitesbrand casings and tubes purchased here-

under at prices prevailing on Yate of shipment. Such: prices

are subject to addition of any dnd ali excise, sales or manufac.

turer’s ‘tax levied by lawful authority on the merchandise pur-

chased tinder this agreement.’’

. *

-Was in all- material respects identical’ and it was °

+ 6 ‘

in effect, as a part of. the pricing pdliey of the chain.

store Givision, a yearly: volume rebate program, Pts

. o . . ss -

program was identical in its previstons for both

Cordovan Assovciates.and White Stores, Ine. (Apdx.

-5a).. li practice, the volume rebate program accorded

somewhat more favorable prices to the Cordovan dis-

tributors than to White Stores and, on February 1,

- 1 a x :

1958, Dayton proposed that for the fiscal year ending

October 31, 1958, it would set up a volume rebate’

pregram based on the result of the combined pur-

chases of White Stores and Cordovan distributors for

such fisealear. This was designated as a super- bonus

program and was accepted by both Cordovan and

White on February 2, 1958 (Apdx. 6a). The trial

_judge held that by initiation of a super-bonus program,

Dayton made a concession to Cordovan and White in-

the prices charged,, which concession was Yadhin ithe

terms of the contract providing for ** prices prevailing

on: date of shipment” (Apdx. 6a).

In his comments, the trial judge observed that

Cordovan and White had been customers of the chain

store division of Dayton for a long period of time and

that, throughout the dealings, there was always an

effort on the part of cagh to obtain more favorable

prices. (Apdx. 10a).

On June 12, 1958, Dayton, responding. to. market

pressures (AYpdx. 7a), presented a new plan of pricing

to White which was called ‘tbased on cost’” pricesy as

distinguished from the old plan of so-called ‘cost

justification” (Apdx. Ja). The new plan of pricing *

was made retroactive to June 1, 1958. The trial judge

found. this new plan was an entirely different method

of pricing and was not included in paragraph 5 of the

contracts calling#for ‘‘prices prevailing on date of

shipment”. The new plan afforded White prices

o 7]

approximately 10° lower than the prices accorded

tnider the old formula.

The trial judge further fyund that throughout the

montlis of April; Mav and June of 1958, negotiations

also took place hetween Cordovan_and Dayton with

respect to a new or amended contract to take the place

of the contract, the construction of whieh was In issue

(Apdx. 6a-7a). He found that the purpose of thesy

negotiations on the part of Cordovan was to obtain

more favorable prices, a ‘cost plus’* basis of pricing

and a different method of operation (Apdx. 7a). These

negotiations proved abortive and no new! contract

eventuated, though on June 26, 1958, Davton offered

Cordovan Associates a new>contract with the same

pricing plan which had been given to White Stored

Certain conditions in the new contract were refused

by Cordovan, and, accordingly, until the expiration

of its contract on October 31, 1958, charges were made

To Cordovan under the “prevailing price clause’? and

these charges the trial jndge concluded were proper,

On review, the Court of Appeals observed) that

basiely Cordovan contended “that all parties under-

stood the prices were to be the same to each of the two

large chain store customers.’ The court held that

the decisive question was whether or not this conten-« —

tion Was correct. It then observed that the trial] judge

had stated in his findings that “(tjhere was no pro-

Vision, either oral or written, nor were there facts from

which an inference Gould be drawn that Cordovan

prices were to be tied to White prices under all

cireumstances.’? The Court of Appeals said this was

actually. an. inference or -conelision frem the facts

With which it was free to disagree, uninhibited by the

clearly erroneous test of Rule 52 of the Federal Rules

of Civil Procedure. The Court did disagree and dis-

agreeing reversed the judgment of the District Court.

Im noting its disagreement the Court of Appeais

referred to the **manifest meaning of the language

used,’ to the “uniform pricing policy”? of Dayton and

to the practical interpretation placed on the contract

by the parties (Apd®. 15a-16a): In these areas it dis-

agreed with the District Court and thus found, contrary

to the District Court, that all parties understood that

the prices were to be the same to each of the two large |

chain store customers under all circumstances (Apdx.

Ida, 17a). Consequently, it decided that the more fa-

vorable prices negotiated by White inured to the benefit

of Cordovan distributors. The court did not comment

upon the fact that the trial court had found, in effect,

that ‘prices Prevailing on date of shipment’? had

reference to a pricing formula, the so-called (cost

justification formula); it did not comment upon the —

fact that the White contract was entered into before

the Cordofan contract and was for a term of three

ars rather than the two vear term of the Cordovan

contract. Nor, did the court refer or comment upon

the fact found by the trial court that Cordovan, like

White, had tried to obtain a differeyg cost basis

though Cordovan sought ‘‘cost plus’? prices at the

time that White agreed to accept prices ‘‘based” on

cost.”’ These factors were not alluded to by the Court

of Appeals even though it disagreed with the District

Court and reversed its jydgment.

REASONS FOR GRANTING THE WRIT

(1) This ease emphasizes the conflict that exists

hetween the cirenits as to the application of the clearly

erroneous test of Rule 52. On the one hand, there is

a line of authority holding that inferences and con-

clusions drawn by the trial judge are ‘not to be rejected

by a reviewing court unless clearly erroneous. These

? .

cases frequently cite and rely upon the deeision of

this Court in United States v. U.S. Gypsum Co.,

333 US. 364, 394. On the other hand, there is a line

of authority that holds that findings which embody

inferences and conclusions can be set aside when the

reviewing court disagrees with the position of the

trial court. These authorities cither ignore or seek

to distinguish the holding of this eourt in d'nited

States v. U.S. Gypsum Co., supra.

In Teras Co. vy. R. O'Brien d& ('o,, 242 F. 2 526,

the Court of Appeals for the First Circuit observed

that there is a singular lack of unanimity not only

lwtween but within individual circuits with regard to

the right of a reviewing court to disregard what it

termed ultimate findings, when based upon written

or un) -nuted evidence and the court collected some

of the more recent examples? of such disagreement.

\ court notes the following recent examples of conflict -

CoNt free to disregard ultimate findings when based upon writ-

ten-or undisputed evidence: Kraft Foods Co. v. Commissioner of

Internal Revenue, 2 Cir., 1956, 232 F. 2d 118; United States v. One Y

1950 Buick Sedan, 3 Cir., 1956, 231 F. 2d 219 (court reaches result

by indicating an ultimate “inference” js not a “‘finding of fact.’’) ;

Seagrave Corp. vy. Mount, Cir., 1954, 212 F. 2a: Chicago, Bur-

lington & Quincy R. Co. y. United States, 7 Cir’ 1955, 221 F. 2d

SIL; Stevenot v. Norberg, 9 Cir., 1954, 210 F. 2d 615.

_ Court cannot reverse such findings merely because it disagrees

With them, but must conclude they are ‘‘clearly erroneous’’; Cen-

tral Ry. Signal Co. v. Longden, 7 Cir., 1952, 194 F. 24 310; Coleman

\. Sears, Roebuck & Co., 8 Cir, 1956, 238 F. 2a 206; Hycon Manu-

facturing Co. ¥. H. Koch & Sons, 9 Cir., 1955, 219 F. 9 353, cer-

tiorari denied, 1955, 349 U.S. 993, 75 S. Ct. 881, 99 L. Ea. 1278;

Auye v. Smitherman, 10 Cir , 1955, 225 F. 24 583, certiorari denied,

15, $50 U.S. 912, 76'S. Ct. 197, 100 L. Ed. 800; Bishop v. United

States, 1955, 96 U.S. App. D.C. 117, 223 F, 24 582, judgment

vacated and remanded, 1956, 350 U.S. 961, 76'S. Ct. 440, 100 L. Ed.

539 semble. .

The seriousness Of the disggreement that exists

between the circuits is reflected in the two different

lines of authority that have developed within the

Sixth Cireuit. In the instant case the court ‘singled -

out a particular finding which it held embodied an

inference or conclusion, and. so holding felt free to

disagree uninhibited by the clearly erroneous test of

Rule 52. It could support its position by citing

authorities both from within the Sixth Cireuit and

from other cireuit® Nevertheless, the position taken

is in sharp contrast to the holding of a different panel

of the same court in Wright CLR. 274 F. 2d 883,

884 (decided February 20, 1960), where the court did

apply the clearly erroneous test to the inferences and

conclusions of the trial judge. In that case the court

said—

We consider the inferences and conclusions of

the trial judge to be*logical and reasonable and

_not clearly erroneous. Rule 3?2(a) F.R.Civ.P.,

28 ULS.C.A. being applicable, the decision of the

Tax Court will not be disturbed. United States

v. United Stas Gypsum Co., 333 U.S. 364, 399,

68S. Ct. 525, OWL. Ed. 746; McAllister v. United

o States, 348 U.St 19, 20, 76.8. Ct. 6, 99 L. Ed. 20;

Central Ry. Signal Co. vy. Longden, 7 Cir., 194

F. 2d 310, 318; Wise v. CALR., 6 Cit., 260 F, 2d 354.

/ It will be observed that the court in that case was

relying wpon the decision of this court in United

States vw U.S. Gypsum Co., 3336 U.S. 364; and

McAllister \. Uneted States, 348 U.S. 19, 20. It also

relied upon a decision’ another circuit as well as a

prior decision of the Sixth Circuit. The fact is that

‘in several recent opinions, Willett v. C.LR., 277 F. 2d

586 (C. A. 6, 1960); CLLR. ve Consolidated Tron Ores |

Limfted, 265 F, 2d 320 (C..A. 6, 1959); and, in Vunker

V. Commissioner, 256 F, 2d 130 (C. A. 6, 1958), the

Court of Appeals for the Sixth Circuit has expressly

referred to this contliet,’ noting that it exists not only

Within the Circuit but that there is a contlict between

the circuits. In the recent Willett case, supra, the

court said

Counsel for the petitioners @ontend that the

erroneous rule is not applicable to cone

drawn by the Trial Judge from undisputed

‘learly

In Commissioner of Internal Revenue v. Con-

solidated Premium Tron Ores, Limited, supra, it

Was pointed out by this Court that not only is

there a conflict in fhe Cirenits on this point but

there are also contlicts on it within the, Circuits,

This is true in the Sixth Circuit. (See cases cited

in the Consolidated Premium Tron Ores ease.)

On this question we adhere to the.#pew expressed

in the Consolidated Premium. 1% Pres case,

\ a. 8

While this Court has in such cases at Giited States

v. US. Gypsum C0., 333 US. 364, 395; Graver Tank

& Mio. Co. Ine. y. Linde Air J ’roducts Co,, 336 U.S.

271, 275-276; MeAillister y. United States, 348 US.

19, 20; and, Commissioner vy. Daberstein, — US, —

* The position taken by the court in this case as to the application

of the cleagly erroneous test is wholly inconsistent with the Posi-

tion. taken in other recent cases in the same court. See United

States-¥—Atenger, 275 F. 2d 42] (decided March 3, 1960) ; and,

Willett v. CLULR., 277 F. 2d 586 (decided April 12, 1960). and is

ineonsistent with the holding in CLLR. y. Consolidated Premium

Tron Ores Limite d, 265 F.2d 856 (C. A. 6, 1959); Dirie' Sand &

Gravel Corp, ¥. Holland, 255 ¥. 2d 304 (C. A. 6, 1958); and Rich

Vv. Pappas, 229 F. 2d 308 (C. A. 6,.1956). But views contrary to

those expressed in the above cases are found in: Gudgel y. CIR,

273 F.2d 206 (C. A. 1999); Vunker vy, Commissioner, 256 FL 2d

130 (C. A. 6, 1958) ; E,W. Sheldon and Co. Vv. CULR., 214 F. 24 655

(CA. 6, 1954); Seagrave Corp. ¥. Mount, 212 F. 2d 389 (C. A. 6,

154): and, Leteher County v. Defoe, 151 F. 2d 987 (C. A. 6, 1945).

“>

(decided June 13, 1960), considered and laid down

guide posts as to the right of a reviewing court to

reject the findings of a trial court, it nevertheless

appears that the decisions of the several circuit eourts

are far from harmonious. It is clear from the con-

Hieding decisions that the various circuit, courts have

divergent views as to the substance of this Court's

prior decisions. Th®§plit in the authorities is manifest

and is retlected in the conflicting decisions of indwidual

circuits whieh produces a particularly undesirable

situation beeause success or failure on review depends

tuo often upon the fortuitous cireumstance of the

make-up of the panel that hears the case. The question

is one Which arises.in many cases and, asa consequence,

ix obviously important. The guide posts which this

Court has laid down, in this admittedly difficult area,

are not sufficient as vet to bring harmony into the

decisions and we believe, therefore, the Court might

well consider the question raised as worthy of further

consideration and elucidation.

(2) While the court below could, because of the

contlicting decisions in the sevegal cireuits and within

the cireuit, find some authority for its position in this

case, We submit that it is clear the court actually failed

to follow the authoritative decisions of this Court

when it simply-neted its disagreement with the tinding

in question and did not subject it to the clearly

erroneous test. The courtbelow felt it was uninhibited

by the clearly erroneous test because the finding in

question was an “inference or conclusion”’, but it is

clear from the authoritative decisions of this Court

that io the extent this finding did involve inference

from basic facts it should have been subjected to the

clearly erroneous test. See, United States vo U.S.

Gypsum Co, 3 US. 364, 395; Commissioner v.

Duberstein, — US. — (decided June 13, 1960).

- ¢

‘ : ai

The court observed that What was essentially at

issne Was the understanding of the parties as to the

meaning of the phrase * prices prevailing on date of

shipment.” That understanding was a question of

fact which the trial court hack the duty to resolve.

This was not a ease in which the facts, as such, were

undisputed. There were two Weeks of trial and

HUMeros gvitnesses testified. In many areas the

evidence was conflicting. This was particularly trie

With regard to the pricing poliey of Davton and the

significance of the various fait< Which constituted the

practical construction of the contract by the parties,

The trial court distilled these disputed facts inte

findings, and in the cornrse of those tindings stated——

~~ "There was no provision, either oral or written,

hor Were there facts from which an inference eoutd

he drawn that Cordovan prices were to be tied te

White prices under al! circumstances,

The Court of Appeals disagreed with that tindiiy,

but did not say that 92 was left with a definite or firm

conviction that the finding was erroneous; it did not

~ay the finding was induced by an erroneous view of

the law; or, that it Was against the Weight of the

evidence, The appellate coagrt simply disagreed. Its

disagreement tends to gloss over the fact that What

the court actually lid on review was te fish in the

troubled waters of ecriflicting inferences.

The Court of Appeals ‘reated the case as one in

Which there was no dispute as to the evidentiary facts.

git eould do this, however, only in the sense that

ordovan, as eppellant, accepted most of the findings

of the trial judze. Those findings were in important

respects the ead product of sharply contlicting

evidence. When the tria! court declared that there

that Cordovan prices were to be tied to White prices

under all circumstances, it undoubtedly had in mind

the conflicting evidence presented with respect to the

_ pricing poliey of Dayton arid the meeting in February

of 1958, at which the super bonys program Was in-

augurated. The trial court may also have had in mind

that any conclusion that White and Cordovan prices

were to be the same under /all circumstances would run

counter to the fact that the White contract and the

Cordovan contract Were éntered into at different times

and extended for different periods of time (Apdy.

fa). It might also have had in mind that any con-

clusion that White and Cordovan prices were to be

the same under all cireumstances would be at odds

with the facet that both White and Cordovan separately

and repeatedly negotiated for different base prices

( Apdx. 10a).

The Court of Appeals, in reversing te judgment ot

the trial judge, purports to disagree only with a Single

finding. In reality, the’ disagreement was more pro-

found because the court found in effect, contrary to

the trial court, that it was the poliey of Dayton to

accord identical prices to both White and Cordovan

‘under all cireumstances’’ and found the course of

dealing of the parties demonstrated an uhderstand-

ing that White and Cordovan be accorded identical

prices “Sunder all) circumstances.” The Court of

Appeals quite obviously looked at the policy of Dayton

and the course of dealings of the parties differently

than did the trial court, though the trial court heard

and observed the witnesses who testified with respect

to the policy and the course of dealings. While’ the

court speaks of the finding in question as an mference,

there must first be facts before there ean be an in-

ference and the determination as to whether or not

ron

Pa 15

there were facts is itself a factual determinatio — te

Which the clearly erroneous test should have been

applied, .

. The decision ofthe Court of Appeals in this case was

issued on Jurie 6, 1960, Seven days later this Court

rendered ifs opinion inv Commiseioncy V. Duherstein,

U.S. — (decided June 13, 1960), and reiterated

Its position as to the application of the clearly

erroneoms test and particularly ips application te in-

Perens It said, in part— j

Where the trial has been by a judge without a

Jury, the judge's. findings must stind unless

“clearly erroneous."” Fed Rules Ciy Proce, 52a),

“A finding is ‘clearly erreneous” when although

there is evidence to support it, the reviewing

caurt on the entire evidence is left. with the

definite and tirm conviction that a mistake has

heen committed.’ United Stites YD United States

(Gypsum Co., 333 US. 364, 895,\92°L. Ed. 746, 766,

68S. Ct. 525./ The rule itself applies also to

factual inferences from undisputed basie facts,

id 333 US. at 294, as with on Inany Oceasions he

presented in this area. (Cf. Graver Tank Miu.

CoV. Linde Air Products ('o., 339 US. 605, 4 19,

610, 94 L. Ed, 1097, 1102, 1103, 70-8. Ct. Ro. And

Congress has in the most ‘explicit terms attached

the identical weight to the findings of the Tax

Court. IRC, § 7482(a),

In the present case it seems clear that the court below

err@d when it failed to apply the clearly errfneons

test to the finding in question, We think'that, regard-

less of the semantics involved, it is obvious that what

the court below did was to make its own appraisal

of the testimony, picky g and choosing for itself

among uncertain and contlicting inferences, Under

the authoritative decisions of this Court this was

clearly improper.

CONCLUSION

We believe that the error in the decision of the court

helow is manifest and that to,the extent the court set

aside inferences by the trial judge simply because it

disagreed with them the decision is in conflict with

principles established in the applicable decisions of

this Court. It is suggested that the Court for that

reason might deem it appropriate to grant the writ

and reverse without further briefs or argument. We

would also poiit out, however, that thisecase does

signalize and emphasize the divergent views that have

been, and now are, held with respect to the application

of the clearly erroneous test. The views are so

divergent that they are reflected in contradictory

decisions within individual cireuits, and sinee the

principles involyed are important in many cases it

may well be thd? the Court would deem it appropriate

to restate and make more explicit the considerations

that are tu guide reviewing courts with regard to the

application of the clearly er roneous test of Rule 52.

Respectfully submitted,

PuHILip ©. EBELING

PicKREL, SCHAEFFER AND EBELING

Third National Bank Building

Dayton, Ohio.

and

JAMES E. CorKEY

Shoreham Building *

Washington, D. ©.

Attorneys for Petitioner

v. 6

—“~

‘

——

‘ ©

la ‘

, APPENDIX A

e ; pean oe

F o

: Findings of Fact and Conclusions

of Law

(Filed May 6, 1959.)

Cecn, District Judge:° t

This case was tried and sibmitted ta the Court upon

* the pleadings, the evidence andvoral arguments of counsel.

Upon consideration whereof, the Court makes the follow-

ing Findings of Fact: |

1. Plaintiff, The Datton Rubber Company, hereinafter

- for convenience referred to as “Daytén Rubber,” is a cor-

poration organized and existing under and by virtue of ’

the laws of: the State of Ohio, and is a citizen of the State |

of Ohio, * .° Aa =

2. Defendant, Cordovan Associatés, Incorporated, here-

. i « ™ s * °

inafter for convenience referred to as ‘*Cordovan,” is at

corporation ergénized and existing under and by virtue @

of the laws of the, State of Virginia, “and is a citizen of the

State A Virginia, . ‘

3. Cordovan i» ‘the owner, by conveyance and agsign-

‘ment from Automotive Associates, Ine., a corporation on -

or about March 1956, of the trade-mark “Cordovan” and -

the molds in which the “Cordovan” -bgand casings and

tubes are manufactured. yes ,

4. Cordovan is engaged in the business of having manu- * b

factured for its associate members and ‘approved distribu-

tors *‘Cordovan” brand casings and tubes for resale by

such associates and approved distributors, who are ( ‘hain

Storé Operators of automotive retail businesses throughout: “tg

. 4 large area of the United States. Such associate members

‘and approved distributors Jare hereafter, for convenience .

sake, referred to as. **Cordovan Associates.” \

2a |

: e e

9.*“Cordovan”™ brand casings and tubes have, since about

1947 and continuously since ‘that date and throughouf the

term of the contract the subject pt this action, been mA&nu- .

factured by Dayton Rabber for purchase and resale by

automotive Chain Store businesses authorized to use the

“Cordovan” brand by the owner of such mark aud molds.

6. White Stores, Inc, hereafter, for convenience sake,

referred to as ‘*White,’? is a corporation with its

principal office in Wichita Falls; Texas, and is now, and

at all times since about 1947 has been, the owner of the

trademark and name ‘*White” as applied to casings and

tubes, and the owner of the molds in which such casings

and tubes were manufacturing for it by Dayton Rubber.

White Stores, Inc., operates a Chain Store retail business

in the aufomotive field in Texas and nearby States.

‘7. Prior to November 1, 1956, for several years, Dayton

Rubber manufactured its own private brand casings under

the trademark anil name “Road King” for purchase for

resale by chain store automotive businesses, .

8. Since. about 1947, Dayton Rubber has operated a di-

vision of its business under a division of its company

generally known and described as its “Chain Store Di-

vision.”’ | .

At all times since the organization of ‘such Division,

seed Rubber has conducted its operations in the manu-

facture and sale of ‘Cordovan,’ "and ‘*White,” and “Roa

King” casings and tubes by and through its Chain Stere |

Division, and. purchasers of casings and tubes manufae-

tured and sold by Dayton Rubber through its Chain Store

Division consisted only of Cordovan Associates, White, and

purchasers of the “Road King” brand.

‘10. Billing prices of casings and tubes manufertared and

sold by Dayton Rubber through its Chain Store Division |

-were established on what is knowy in the trade as a “Cost

Justificafion” basis. -

~— : ~

s ;

. Si

11. At all times prior to August 16, 1956, and ‘continu-

ously thereafter until June 1, 1958, the net billing prices

of the Dayton Rubber for tires (casings) and tubes of the

sameSyuality, kind, and size sold by it through its Chain

‘Store Division were identical as hetween all customers of

the Chain Store Division of Dayton Rubber, including

White and Cordovan Associates. The ‘‘net billing price,”

as herein uséd, sometimes referred to in the trade as “base

billing price,’? means the gross billing priée less ‘‘mold

wnortization” charge in the case of Cordovan, dnd “price

equalization” charge for amortization of White molds in

the case of White, ' ns

12. For several years prior to August 16, 1956, there

Was a pricing policy established and in effect in the Chain

Store Division of Dayton Rubber, applicable alike to all

customers of such Division, whereby identical base or net’

billing prices were established for all tires and tubes sold

through such Division to all customers thereof, namely,

Cordovan, White and Road King, and that Cordovan Axsso-

ciates ‘and in particular representatives thereof constitut-

ing the Bourd of Directors of Cordovan, had been told of

this uniform pricing policy, andgthat base or net billing

prices for tires and tubes of the same kind, quality and

“ize were identical as between all customers of such Di-

Vision. °

13. Prices‘as established by Dayton Rubber in its Chain

Store Division fluctuated from time to time with indust ry

'. conditions, but fluctuations so o curring. were applied uni-

formly and identically as to all eustomérs of such Chain

Store Division. Prices, as established in the Chain Store’

Division, were revised from time to time, generally on a -

quarterly basis, and shipments made during any such

quarterly period were at the prices as established and then

in effeet for such quarterly period. This policy was known

to Cordovan Associates, White, and customers of the Road

King brand, being all’of the customers of the Chain Store

4a v

Division throughout the time of their respective purchasing

from such Chain Store Division.

tracts between Daytén Rubber, Cordovan, Cordovan Asso-

14. Prior to Dera & 1996, there were no written con-

ciates, or White. /

15. In the Summer of 11956, prior to August 1, 1956,

Dayton Rubher concluded to abandon its efforts to pro-

mote sales of its own Road King brand through its Chain

Store Division, and to promote its sales to chain stores

through expansion of Cordovan Associates and Whtite re-

tail sales outlets. In adopting this policy, Dayton Rubber

desired to;#ssure itself for a proposed period of at least

three years of the purchase from Dayton Rubber of all of

the tire and tube requirements of all Cordovan Associates

and White, and proposed to uate h a written contract ae-

cordingly. :

16. Such written contracts, as prepared by Dayton Rub-

ber and so proposed to Cordovan and White, were duly

executed and delivered between Dayton Rubber and White

(ish) vit No. D) tor a term of three years commencing

“August 1, 1956,.and between Dayton Rubber and Cordovan

‘(Exhibit No. 1) tor » term of two years commencing No-

vember 1, 1956, Cordovan at that time being unwilling to

enter into such proposed contract for a term of more than

two yeurs, ’

17. The. contract with White contained the foliowing

paragraph as to prices.to be charged for tires and tubes

purchased from Dayton Rubber-under such contract:

“5. Prices. Supplier will invoice Buyer ‘and ap-

proved Uistributors tor White brand casings and tubes

purchased hereunder at prices prevailing on date of

shipment. Such prices are subject to addition of any

and all excise, sales, or manufacturer’s tax levied by

lawful authority on the merchandise purchased under

this agreement.”

& . Da <4 “~

The contract with Cordovan contained the following

paragraph with regard to prices for tires and tubes pur-

chased under sue} contract.

“oO. Prices. Supplier with invoice buyers associates

and approved distributors for Cordoyan brand casings

and tubes purchased herevnder at prices prevailing

on alate of shipment. Such prices are subject to addl-

tion of any and all excise, sales, or manufacturet’s tax

levied by lawful! authority on the esrliatitieDeaie

this agreement.” 2

In each contract, the prices at which the tires and tubes

to be parchased thereunder were defined as “prices pre-

vailing on date of shipment.”

18. At all times from and after the effective date of

such contract, November 1, 1956, and until at least June

1, 1958, net billing prices as stipulated in evidence between

the parties hereto were identical as between Cordovan JAs-

sociates and White for the same kind, quality and size of

tires and tubes.

19. That for the fiseal year ended October 31, 1957,

there was established and in effect, as a part of the pricing

policy of the Chain Store Division, a volume rebate pro-

xram on a graduate scale of percentage rebate on volume

of purchases for such fiseal year identical in its provisions

with both Cordovan Associates and White, but that the

het result of this volume rebate policy was to create a

difference in volume purchase percentage rebate to Cordo-

vin as compared te White, because of the -differerk aggre.

“ate volume of annual purchases of these two groups for

sich fiseal year. The purpose of such bonus program was

to create an incentive for Cordovan Associates and White

to inerease their resales of Dayton Rubber products, and

the plan in effect as to both was identical’

20. For the purpose of creating a greater sales incentive

for the future to Cordovan Associates and White,and

| nn

establishing a joint bonus and super-bonus program, based

on combining the sales of both for computation of such

volume rebates, Dayton Rubber invited the members of

the Board of Directors and officers of Cordovan and the

President of White to a joint meeting-at the Ambassador

Kast Hotel, in Chicago, on the evening of February 1,

1998, and at this meeting Dayton Rubber, through its

representatives, proposed that for the fiscal year ended

October 31, 1958, Dayton Rubber would set up a volume

rebate program Dased on the result of th combined pur-

chases of White and Cordovan Associates for such fiseal

year on a graduate scale of percentage rebate oa such

combined purchases up to a maximum of 744%, which —

Dayton Rubber designated as a “super-bonus program,”

and that, anticipating such combined saleé volume would

reasonably exceed a minimum of 5% of such fiscal venr,

credit memos would be issued to each purchaser with re-

spect to all purchases of tires and tubes made after No-

vember 1, 1957, to February 28, 1958, and thereafter for

the remainder of such fiseal year such 5% credit would be

applicable to all further purchases during the remainder

of the fiscal year, and final credit memo issued at the end

of such fiscal year.

21. The above proposal by Dayton Rubber was accepted

by both Cordovan and White February 2, 1958, credit

memos pursuant thereto were duly issued, and base or

net billing prices continued and remained identical as he-

tween Cordovan. Associates and White until June ly 195.

22. At the Chicago meeting the Dayton Rubber made a

concession to Cordovan and White in the prices charged

which ——— Was within the terms of “prices prevail-

ing on date of Mipment.” There were no modifications of,

or amendments or supplemetits to the contracts bet ween

Dayton Rubber and Cordovan and Dayton Rubber. and

White. |

23. After April 1, 1958, and throughout the months of

April, May and June of that yea¥, negotiations took place

e=~)

beeween Cordovan and Dayton Rubber with respect to a

new or amended contract to take the place of the contract,

the construction of Which is the issue before this Court,

but such negotiations failed to result in any new or amended

contract, and the ebntraet submitted to this Court for con-

struction remained in ful] force and effect until October

31, 1958, without change. The purpose of the negotiations

was to get ghore favorable prices—a Cost-plus basis of

pricing and a different method of operation.

24. Near the end of April, 1958, Cordovan notified Dayton

Rubber that it would terminate the contract as of October

31, 1958. Toward the end of the year 1957, White advised

Dayton Rubber that U.S. Rubber ('o., had quoted it better

prices than Dayton Rubber Was giving,

20. Dayton Rubber was concerned aboat the possible

loss of the Cordovan business and was interested in ob.

taining a new contract with it. Dayton Rubber was also

concerned with retaining the bMsiness of White and was

under threat of White to buy of other manufacturers at

lower prices.

26. On June 12, 1958, Mr, Goodenberger made a trip

to Texas to see representatives of White. At this time as

a result of White's complaints bout the prices of “* White’

brand casings and tubes being too high, and White's threat

to buy casings and tubes elsewhere at lower prices, Dayton

ubber presented to White a new plan of pricing. This

new plan was called a “based on cost price” as distin.

cuished from the old plan which was called “cost justifi-

cation.” Under the ygw plan the benus and super bonus

rebates were abandoned. The new plan of pricing was ac-

cepted by White and became effective retroactively to

June 1, 1958. This new plan was an entirely different

method of pricing and was fot included under paragraph

9 of the #otracts, “Prices prevailing on date of ship-

ment.” This method of pricing was abandoned. This new

) e

5 }-

» , Ra

27. On June 26, 1958, Dayton Rubber offered a new

contract to Cordovan to replace the old contract expiring

on October 31, 1958, and to be effective as of J uly 1, 1958.

This offer provided for the same method of pricing as was

given to White and the prices were identical with those

of the new White Plan. There were conditions attached.

to the offer which were unacceptable to Cordovan and no

new agreement was made,

28. There was no provision, either oral or written, nor.

were there facts from which an inference could be drawn

that Cordovan prices were to be tied to White prices under

all circumstances.

39, From and after June 1, 1958, Dayton Rubber con-

tinued to invoice Cordovan Associates at prices ‘‘ prevail.-

ing on date of shipment” which were higher than prices

made effective June 1, 1958 as to White purchases from

its Chain Store Division.

CONCLUSIONS OF LAW AND FACT

l. The Court has jurisdiction over The Dayton Rubber

‘Company, plaintiff, herein, and defendant, Cordovan Asso-

ciates, Incorporated the parties herein and the subject

matter of this action.

2. The sole issue before this Court is the construction

of the contract and in particular Paragraph 5 thereof,

entered mto between plaintiff and defendant herein under

date of November 1, 1956, a copy of which contract is in

evidence, tharked “Exhibit 1.”

_ 3. Such contract was duly exeented and delivered be-

tween the parties hereto and is a valid and enforcible

contract for the specified term thereof, to-wit: November

1, 1956 to October 31, 1958.

_ 4. Paragraph 5 of the contract between Dayton Rubber

and Cordovan does not in and of itself specif y any particu.

\ ©

lar schedule of prices that can be determined without refer

enee to sources outside of the document.

‘The phrase “at prices prevailing on date of shipment”

as used in the contract, contemplates agsehedule of prices

to be fixed by the seller. These prices cannot be arbitrarily

fixed, but must be suc, #s Will enable the manufacturer,

(seller) to compete with other manufacturers for the busi.

* ness of the suyer- (Cordovan) and such as will enable the |

buyer to compete with other dealers for the business of

the buying public, that is, the customer.» :

Since the contract between Dayton Rubber and White

had the same paragraph 3 as the Cordovan contract and

used the term ** pre vailing prices” in the same way, it must

he construed that White prices and Cordovan prices would

be the same,

® The Court concludes, that the prices would be the

same for the reason that the provisions of the contracts

ure the same, beth units were customers of the Chain

Store Division and the only brand customers of that Di

Vision and the volume of business of the two units were

substantially the same. Things that ary equal to the same

things are equal to each other.

6. Finally, the Court draws inferences and conclusions

from the faets found that the prieing schedule at whieh

White was billed after June 1, 1958, constituted a new

method of pricing and was not included within the term

“at prices prevailing bn date of shipment”;

® That this new plan\of pricing was adopted in order to

hold the business of Y shite and to obtain a new contract

with @rdovan. | \ oé

That Cordovan did nH aecept the new plan with the

conditions attached:

And that it was, therefore, bound by its contract to pay

“at prices prevailing on date of shipment” until its con-

'ract expired on October 31, 1958.

10a

Wherever in these Findings and Conclusions a statement

is a mixed Finding of Fafét and Conclusion of Facet, it

may be considered as either dy both.

COMMENT

Cordovan and White had been customers of the Chain

Store Division of Dayton Rubber for a lang period of time.

Their dealings antedated by several years, the contracts

which are involved in this case. Throughout these dealings,

there was always an effort on the part of the customers

to obtain more favorable prices. In the Fall of 1957, this

apparently had reached a point. where Dayton Rubber

considered that it was necessary to make some coneessions.

At a meeting in Chicago on February 1, 1958, Mr.

Kisbrouch, at that time of Dayton Rubber, offered to repre

sentatives of Cordovan and Mr. White a plan whereby a

rebate, called a “super bonus” was to be firured on the

combingd purchases of both White and Cordovan. Thi

was a/considerable concession and eased the tension for

a while, ;

mn April 1, 1958, Mr. Kisbroueh, Who had left Dayton

Rubber, became the executive head of Cordovan, He im

iuediately began negotiating with Dayton Rubber for a

different price formula. It was the feeling of representa-

tives of Cordovan that it had reached maturity, so to

speak, and was buying in sufficient quantities that. it

should be entitled to a peice formula known ‘as ‘“cost-plus.”

-To strengthen its demands and bargaining position, Cor

dovan, toward the end of April, 1958, gave Dayton Rub-

ber the six months’ notice required by the contract that

it would terminate its contract on October 31, 1958. Mr.

Kisbreuch was negotiating for a new pricing agreement

on ® cost-plus basis for Cordovan. He was not concerned

abe ct lower prices for White.

In the meantime, White was restless, As Mr. White in-

dicated in his deposition, he was of the opinion that he

lla

Was not bound by the contract if he could obtain better

prices elsewhere. In the face of losing this substantia!

block ‘of busi@Mess, Dayton Rubber was foreed to try to

adopt some plan that would salvage the business of these

two customers,

Accordingly, it worked out a new pricing plan known

ax **hased on cost” prices. By this plan rebates were

abandoned and net prices were about 10% lower than they

had been under the old plan. Mr. Goodenberg offered this

new pricing plan to White and it was accepted. White

continued its bustness With Dayton Rubber. Ticreafter,

Dayton Rubber offered the plan to Cordovan, with some

condtiions attached. The purpose of Dayton Rubber offer.

ing this plan te Cordovan was to get a new contract, Dav-

ton Rubber considered that it could net offer the plan

Without the conditions and Cordovan considered that it

could not accept the plan with the conditions, _ Therefore,

Hoe agreement was reached and Dayton Rubber lost the

business with the expiration of the contract. - .

It seems absurd that Dayton Rubber would be hound

to reduce Cordovan's prides by 10% and still not get any

contract. Certainly, it cannot claim the benefit: of prices

Which were given to White in order to retain its business

and with whieh Dayton Rubber did hold the White husi-

Hess,

(Signed) Lester LL. ¢ ‘voll

a Judge, United States

' District Court, S.D.O.

lla

AFPENDIX B

: Order of Declaratory Judgment

* (Filed Jung 8, 1959.)

This case came on for hearingsupon Plaintiff's Complaint

for a Declaratory Judgment, the Defendant's Amended

sAnswer, the oral evidence, stipulations of counsel, exhibits,

‘proposed findings of fact and ‘conclusions’ of law, oral

arguments and briefs of counsel.

Upon consideration whereof the Court finds the facts

to be as stated in findings of facts filed on May 6, 1959,

which are inesrporated herein and made a part hereof.

That the Court has jufisdiction over the Dayton Rubber

Company, the plaintiff herein and’ Cordovan Associates, :

Incorporated, the defendant herein, and the subject matter

of this action, between Dayton Rabber Company and Cor-

dovan Associates, Incorporated.

That a certain contract entered into between plaintiff

and defendant herein unger date of November 1,, 1956, a

copy of which contract is in evidence marked “Exhibit 1”

was duly executed and delivered between the parties hereto

and is a valid and enforeible contract for the speaified

term thereof, to-wit; November 1, 1956 to October} 31,

1958, , | ai ee

: That the correet priées are determined under Paragraph

- 9 of the contract to be those prices established at the time

of shipment by the plaintiff for merchandise sold by the

piaintiff to the defendant’s associates and. approved dis-

tributors during the term of the contract.

And that all of the conclusions of law und fact as stated

in the Court’s conclusions dated May 6, 1959 are incor-

porated herein afd made a part hereof. ey

Costs of $21.40 paid.

/s/ Lester L. Ceeil

Judge, U.S. District Court,

SDO.

’ : :

;

v ‘ ‘ . i

l3a ,

APPENDIX C :

Opinion of the United States Court of Appeals

_ For the Sixth Circuit |

Before Martin, Weick, and O’Suuivan, Cirenit Judges.

M&rtin Circuit Judeo. The Dayton Rubber Company, a

manufacturer of automobile tires and tubes, brought this

action for a declaratory Judemer®, interpreting the pricing

clause of a contract hetween that company and Cordovan

Associates, Incorporated, ond\of the two automobile retai}

chain sfores to which its manufactured tires and tubes

were sold. The contract prices to be paid for tires, pur-’

chased by.Cordovan Associates from Dayton Rubber Com-

pany, were to be “prices prevailing on date of shipment.”

o\ separate contract with White Stores, lie., the other auto-

notive retail chain store to which Dayton Rubber Company

sold its tires, contained am identical pricing clause.

The defendant-appellant, Cordovan Associates, Ineor-

porated, appeals to this court from an adverse Declaratory

Judgement entered by the trial judge. who found the prices

charged by the rubber company to be lawful under its

contract with appellant. This judgment was in consonance

with the Findings of Fact, the “Conclusions of Law and

ect” and the **Comment” made by the trial judge-wtter

anon-jnry trial of two wiheks’ duration. ,

From 1947 to 1956, Dayton Rubber Company, through

its chain-store division, had sold tires to hoth White Stores

and Cordovan Associates, billing them on an identical

“cost. justification” basis without written contract with’

either customer, Fluctuations ‘in prices, wdsich generally

came about quarterly, were applied uniformly and identi-

cally to shipments going to both customers. In 1956, the

appellee company executed separate contracts with White -

Stores and Cordovan Associates for stated terms of thre«

and two years, respectively. The two contracts contained

the same’ pricing clause: “prices prevailing$ on date of

shipment.” The prices charged the two customers on

—--+

I4a. *

sales subsequent to the contracts continued to be identical

for the’ same kind, quality and ‘size of tires and tubes...

This equal-tre@ment 'policy’continued after separte, but +

identical, supplemental agreements between Dayton Rub-

_ ber Company and Cordovan Associates, Incorporated, and.

between Dayton Rubber Company and White Stores, Ine.,

had been entered into on February 2, 1958. In these -sup: °

plemental agreements, the rubber company gave each of. -

its two chain store customers a seale of rebates, graduated

according to the combined volume of tires purchased, up to

a maximum of seven-and-gne-half pareent of the purchase

price. This concession to the two-customers was made in

order to instilt greater buying initiative;.‘and prices to

gach chain-store customer continued to be computed-iden-

tically thereunder until June of 1958, The\concession, or

modifi¢ation, was within the terms of the *% iees prevail-

ing on date of shipment” provision included -in. each of

the contracts. _, | ay

. Although the contract between Daytow Rubber Company

and White Stores, Inc., had more than » year to run, the

appellee ruhber company on June 125-1958, gave White

Storgea new pricing plan, “based on cost price.” This was

done,in order to retain the customeg’s- business ; and the.

plan was ,made retroactively effective to June 1, 1958):

This cost-price plan proved to be. ten percent lower to

White Stores than was the old ‘‘cost justification”’ formula; / ;

pricing and was not included under paragraph 5 of the

contracts,” : a4

On June*26, 1958, the appellant, Cordovan Associates,

Incorporated, was offered a new contract with the same °

new pricing plan/which had been given to White Stores.

Certain conditions therein were refused by the appellant.

. So, until the expiration of its contract on October 31,1958,

charges were made to the Cordovan company under the

_ “prevailing price” clause. These charges were ten percent

-higher than those which White Stores Was required to

, > ,

. , rE. 8%

lda

— ° y = . 4 - ; ; ° .

| i. . | 4 3

ae <f . a é ;

° :

pay during the same period. tis the contentidh of ap-

pellant that .the “prevailing prices” clause in its contract

with Dayton Rubber ¢ Mpatiy entitled i¢.to the same

prices giv?s by appellee to White Stores under’an identical

pricing clause in the contract between the rubber company

and White Stares; and that ‘all parties understood the

prices Were to be the same to each of the two large chain-

store customers. ,

Whether or not thid contention is correct is the decisive

“ question to be angwered on this review. Chandler vy. United

States, 226 F. (2d) 403, 405 <C. "A, 7). Although the able

trial judge stated in his findings of fact that ‘there Was no

“provision, either oral ‘or written, nor ‘were there facts

from which an inference could be draggin that Cordovan

prices were to be tied to White prices under all circum.

stances,” this is actually an inference or conclusion drawn

from the facts with which an appellate court, uninhibited

by the “clearly erroneous” test of Rule 52, Federal Rules

of Civil Procedure [28 U.S. C. A. following 723 (e)], is

free to disagree,

In the case at bar, as in Letcher County\y, DeFoe, 151

F. (2nd) 987, 990, (C. A. 6), there was “no factual con-

_troversy and no chajlenge to the evidentiary findings -of:

othe court.” In such‘ a situation, an appeltate court, “re-

‘mains free’to draw the ultimate inferences and conclusions

Whieh- evidentiary Writings reasonably induce.” See “alse

Wallnig v. N.C. & St. L. Ry., 155 F. (24) 1016 (C. A. 6);

Harris Stanley Coal € Land C8 v. Co 0. Ry. Co., 154

B. (2d) 450 (CL A.6). =

| Considering the language used in the—asej Mg clause

of the contract—*‘prices prevailing on date of shipment”

~—We think it necessary, if possible, to enforce. toe instru.

tient according to the manifest meaning of the language

‘used. Thé term “prevailing prices” would @em t&é mean

° * . . 0

prices, which, at any particular time, are charged by a

seller for a certain product, We think it would be illowi-

cal to hold that a seller may charge ope of its two cus-

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tomers a.lower price thane the other for the same item,

when both have-contracts to receive goods at “prevailing

prices.’’? There can be,only one **prevajling price’’ at a

yiven time; afdy in the present context, it would fairiy

mean the lowest price for the commodity which the seller

gives to either of his two large buyers in conformity with:

a contract provision for sales at ‘‘prevailing prices.”

Throughout their ¢ourse of dealing, tt had been the uni-

form pricing poliey of Dayton Rubber, Company to bill its

two chain store customers af identical base, er net, billing

prices for tires furnished. The prices fluctuated from‘time

to time, but the fluctuations were applied “uniformly and

identically as to alleustomers.” Tue Board of Directors

of Cordovan Associates was told of this pricing policy;

and this was the system which the parties followed without

deviation. Thus, in departing from this.systeém by giving

White Stores a lower price, for whatever reasori, and cor.

respondingty refusing to lower thie price to Cordovan. As-

sociates,. except under certain conditions, the appellee com-

pany was ho longer selling to appellant at the “prevailing

price’’ called for in tue contract between them.

Even if the’ meaning of “prevailing prices” is not dis-

closed by the actions of the parties up to the time the con-

tract between Dayton*Rubber Company and Cordovan As.

soicates was signed, their. own practical interpretation of

the pricing clause in performing the contec*t would carry

great weight—if indeed it did not control—in its interpre-

tation. This has bee: the settled rile both in this circuit

and in the State of Ohio. t'ederal Surety Co. vy. Bentley &

Sons Co., 51 F. (2d) 24 (C. A. 6): See also Cincinnati v.

“as Light & Coke Co., 53 Ohio St. 278, where the Ohio Su-

preme Court held that w contract to furnish gas at the

* “lowest average price at which gas shall or may be fur-

nished to private indivigyals in’ the cities of New Orleans,

Baltimore, New York, Louisville and PittsBargh,”. was

sufficiently clear and unambiguous to be interpreted by

the court. The court added that, in ease of doubt, the prae-

8 ee

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V7a\_

tical interpretation which had been placed on the «ontract

by the parties over a lox & period of time should be adopted

as the proper one.’ It was stated, however, that “to have

“any value as a practical construction, the course of dealing

should be uniform, unquestioned and fully concurred in

by both parties.” Such Was certainly the situation with re-

spect to Dayton Robber Company and Cordovan Associates, -

Incorporated, Pa ¢ ea =

' For the foregoing reasons, the Declaratory Judgment

entered in the United States District Court is reversed, The

case is remanded for entry of judement in accordance with

this opinion.

June 6, 1960

APPEAL from the United States District Court for the

Southern District of Ohio. | ,

' Tuts Cause came on-to be heard on the transcript of the

record-from the United States District Court for the South-

ern District of Ohio, and was argued by counsel.

On Consteration Wuergor. It is now here orderéd and

adjudged by this Court that the Declaratory Judgment of

the said District Court in this cause be and the sanie is

hereby reversed and the case remanded to the District Court

for entry ef judgment in accordance, with the opinion

herein.

~ +

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.