Appendix — Continental TV, Inc. v. GTE Sylvania Inc.

Supreme Court brief1977

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JOINT APPENDIX ~~ © 3%

MICHAEL RODAK, JR., CLERK |

Iu the Supreme Court

OF THE

Anited States

—_—_—-— -——— -

OcToBEeR TERM, 1976

No. 76-15

ConTINENTAL T.V., Inc., A & G Sa.es, SYLPAC,

Inc. and S.A.M. Inpustries, Inc., Petitioners,

vs.

GTE Syivanta Incorporated, Respondent.

Cea

On Writ of Certiorari to the United States Court of Appeals

for the Ninth Circuit

Petition for Certiorari Filed July 8, 1976

Certiorari Granted October 18, 1976

PERNAU - WALSH PRINTING CO. - 562 MISSION STREET - SAN FRANCISCO, CA 04108

— Rees =

JOINT APPENDIX

In the Supreme Court

OF THE

Anited States

OcToBER TERM, 1976

No. 76-15

ConTINENTAL T.V., INc., A & G Sates, Syupac,

Inc. and 8.A.M. [npustrigs, INc., Petitioners,

vs.

GTE Sytvania INCORPORATED, Respondent.

On Writ of Certiorari to the United States Court of Appeals

for the Ninth Circuit

Petition for Certiorari Filed July 8, 1976

Certiorari Granted October 18, 1976

Subject Index

Page

AE» 54 nbidadkcan ons weeds tate 6ekes ce08 vex 1

Sylvania’s Requested Jury Instructions .................. 5

I ee eo ecde oteceetes 18

ee ne TI, ie cidbc Ba ois cvcdoneedbecnecds 28

We I IED 64 coon scbatocccecesctcanns 28

Testimony of John T. Morgan ............-+--+000- 116

Testimony of Donald E. Carroll .................... 140

Testimony of Calvin Savage ...............0eeeeeees 209

Testimony of Kenneth C. Lopolito .................. 223

Testimony of James W. Hines ...................... 266

Temtamamy Gf Tratmee 6. BGR ....ccccccccaccaccccncs 287

Testimony of George N. Shahood .................... 293

Testimony of Richard N. Sanford ................... 358

BOM GE THUG Ge SUED owes tv cccccccccvestces 361

Testimony of Ray J. Steiner .:..........cccccccccees 362

Testimony of Donald E. Pedlow ..................... 378

Testimony of William E. Bows ...............eeeeee. 379

Testimony of Lee E. Preston, Jr. .............2+-00: 401

Testimony of Thomas D. Rivers ..................... 474

EY GE Te IED oc chs ccccncecdécecedcoess 476

Se Se ME iid ois sc bvndccccotccickséicas 478

BS TINUE NP I once cctcccccccdsccecescsces 480

Argument on Post-Trial Motions ....................000- 493

Verdict, Judgment and Notice of Appeal ................. 497

DOCKET ENTRIES

Document , Entry

Complaint filed by John P. Maguire &

Co., Ine. v. Continental T. V., Ine.;

A & G Sales, Inc.; SYL-PAC, Inc.;

JOHN DOE CO.; George N. Shahood

and Margaritha H. Shahood, defend-

ants; summons issued; writ of attach-

ment issued October 12, 1965

Answer filed by defendants Continental

T. V., Inc, A & G Sales, Ince.,

Sylpac, Inc., S.A.M. Industries (sued

as John Doe Co.), George N. Shahood

and Margaritha H. Shahood; counter-

claim and cross-claim filed by Con-

tinental T. V., Inc. A & G Sales,

Sylpac, Inc. and S.A.M. Industries

against John P. Maguire & Co., Inc.

and Sylvania Electrie Products, Ine. November 22, 1965

Order filed that Sylvania Electric

Products, Inc. be made a defendant

to the cross-claim and that summons

be served December 6, 1965

Undertaking on Attachment (claim and

delivery) filed in the sum of $155,-

138.66; return on executed attach-

ments (claim and delivery) filed;

undertaking for release of attach-

ment in the sum of $95,000 filed by

defendants January 11, 1966

Reply of J. P. Maguire & Co., Ine. to

counter-claim filed January 25, 1966

Stipulation and Order filed dropping

parties, adding a party and allowing

the filing of an amended cross-claim March 4, 1966

Defendants and Cross-complainants’ de-

mand for jury trial filed April 8, 1965

Document

Answer of cross-defendants, John P.

Maguire & Co., Inc. and Sylvania

Electrie Products, Inc. to cross-claim

filed

Notice of Motion and Motion by John

P. Maguire & Co., Ine. and Sylvania

Electric Products, Inc. for Summary

Judgment (or Partial Summary

Judgment) filed

Cross-claimants’ Memorandum of Points

and Authorities in Opposition to

Cross-defendants’ Motion for Sum-

mary Judgment (or Partial Sum-

mary Judgment) filed, with Exhibits

attached

Conference held before Justice Tom C.

Clark, Case ordered for Pre-trial

July 20, 1970 and for Jury Trial

September 21, 1970

Pre-Trial Order No. 2 filed (Justice

Tom C. Clark)

Seconded Amended Cross-claim for re-

straint of trade and damage to busi-

ness and property filed by cross-

claimants, Continental T. V., Inc.,

A & G Sales, Sylpae, Ine. and

S.A.M. Industries, Ine.

Pre-Trial Conference held and trial on

cross-claims set for September 21,

1970 (Justice Tom C. Clark)

Order filed denying Motion for Sum-

mary Judgment (or Partial Sum-

mary Judgment) by John P. Maguire

& Co., Inc. and Sylvania Electric

Products, Ine.

April 22, 1966

April 30, 1970

June 1, 1970

June 23, 1970

Juiy 15, 1970

July 16, 1970

July 20, 1970

July 29, 1970

Document

Answer filed by cross-defendants John

P. Maguire & Co., Ine. and Sylvania

Electric Products, Ine. to Second

Amended Cross-claim

Jury Verdict Returned and filed

Cross-defendants’ Notice of Motion and

Motion for Judgment notwithstand-

ing the verdict, or in the alternative

for a new trial filed

Cross-claimants’ Notice of Motion and

Motion for Findings of Fact and

Conclusions of Law respecting equi-

table relief claimed filed

Judgment entered, filed December 11,

1970, pursuant to Jury Verdict, that

cross-claimants have and recover from

cross-defendant Sylvania Electric

Products, Inc., the sum of $1,774,-

515.00; said sum being the verdict of

the Jury trebled as a matter of law,

plus $18,000 costs, together with

interest on said sums at 7% per

annum from date of entry of judg-

ment

Order filed denying cross-defendant’s

motion for judgment notwithstanding

the verdict and for a new trial; Find-

ings of Fact and Conclusions of Law

filed

Notice of Appeal from designated por-

tions of judgment filed by cross

defendant Sylvania Electric Prod-

ucts, Ine.

Record on Appeal transmitted to the

United States Court of Appeals for

the Ninth Circuit

August 28, 1970

November 6, 1970

November 16, 1970

November 24, 1970

December 18, 1970

February 16, 1971

March 2, 1971

April 9, 1971

Document

Judgment of the United States Court

of Appeals for the Ninth Circuit

pursuant to Rule 36 of the Federal

Rules of Appellate Procedure entered

affirming the judgment of the United

States District Court

Opinion of the United States Court of

Appeals for the Ninth Circuit filed

Corrected order of the United States

Court of Appeals for the Ninth Cir-

euit filed withdrawing the majority

and dissenting opinions filed on May

9, 1974 and setting the case for

rehearing en bane

Opinion of the United States Court of

Appeals for the Ninth Cireuit filed,

after rehearing en bane, reversing the

judgment of the United States Dis-

trict Court and remanding for a new

trial

Mandate of the United States Court of

Appeals for the Ninth Circuit revers-

ing the judgment entered in the

United States District Court and

remanding for new trial filed

Petition for Certiorari to the United

States Court of Appeals for the Ninth

_Cireuit filed in the Supreme Court

of the United States by petitioners,

Continental T. V., Inc., A & G Sales,

Sylpac, Ine. and S.A.M. Industries,

Ine.

Petition for Writ of Certiorari to the

United States Court of Appeals for

the Ninth Cireuit granted by the

Supreme Court of the United States

May 9, 1974

May 10, 1974

December 19, 1974

April 9, 1976

May 4, 1976

July 8, 1976

October 18, 1976

SYLVANIA’S REQUESTED JURY INSTRUCTIONS

(Citations Are To Clerk’s Transcript (CT) )

[1157] Sytvanta AND MaGutmre’s

REQUESTED JuRY INSTRUCTION No. 29 (REVISED)

If you find that any action taken by Sylvania with

respect to new locations or territories was not pur-

suant to any contract, combination or conspiracy as

I have defined those terms, but was simply the uni-

lateral exercise by Sylvania of its own policies with

respect to franchising of dealer locations, then you

must find that there has been no violation of the

antitrust laws and you must bring in your verdict

for Sylvania and Maguire with respect to Continen-

tal’s antitrust claims. If, on the other hand, you

determine, in accordance with my previous instruc-

tions, that there was a contract, combination or con-

spiracy between Sylvania and some other party

designed to achieve or enforce sales distribution re-

strictions on dealer locations, you should then proceed

to consider whether such locations practice is lawful

or unlawful under the instruction I will now give you.

If, in accordance with my previous instructions,

you find that Sylvania and some other person or per-

sons engaged in a contract, combination or conspiracy

to establish or enforce sales distribution restrictions

on locav.ons of Sylvania dealers, then you must con-

sider whether or not such restrictions constitute an

unreasonable restraint of competition and trade in

the Northern California or Sacramento market for

television products. If they do constitute such an

unreasonable restraint of competition, then the prac-

tice would be unlawful; if not, then whatever your

finding on the contract, combination or conspiracy

[1158] issue, you must find that the practices are not

unlawful.

In this connection you should understand once again

that the purpose of the antitrust laws is to promote

competition, but not to strike down every conceivable

contract or joint enterprise which might have some

restraining effect on competition or trade. Every

agreement concerning trade to some extent restrains.

But the true test of legality is whether the restraint

imposed is such as really regulates and perhaps

thereby promotes competition or whether it is such

as may suppress or even destroy competition. To de-

termine that question you must consider the facts

peculiar to the business to which the restraint is

applied, its condition before and after the restraint

was imposed, the nature of the restraint and its effect,

actual or probable, the history of the restraint, the

evil believed to exist, the reason for adopting the

particular remedy, and the purpose or end sought to

be obtained. Thus, it is that the antitrust laws pro-

hibit only those restraints of trade which unreason-

ably restrict or suppress competition.

Chicago Board of Trade v. United States, 246

U.S. 231, 238 (1918) (Brandeis, J.)

Standard Oil Co. v. United States, 221 U.S. 1

59-62 (1911)

Given: a GE Ae erie Pe

STE OA Lap a Le

Given as Modified :

United States District Judge

[1159] Syivanta AND MaGuIRE’s

RequesteD Jury Insrruction No. 30 (REVISED)

In determining the question of the reasonableness

or the unreasonableness of the challenged location

practice, you should understand that the antitrust

laws specifically recognize the right of a manufac-

turer, such as Sylvania, which does not dominate a

particular market, to actually agree with a particular

dealer not to authorize sales of the manufacturer’s

products by another dealer from locations within the

territory served by the first dealer. Therefore, with-

out in any way intimating whether such an agreement

exists in this case, I instruct you that if you were to

find that Sylvania did agree, whether explicitly or

tacitly, with a dealer, such as Handy Andy, not to

franchise or permit the sale of television products

vy another dealer, such as Continental, in the area

served by the first dealer, ie., Sacramento, such an

agreement would be a reasonable restraint of trade,

and Sylvania would also be entitled to take any steps

reasonably uccessary to fulfill the commitment that

it had made pursuant to such an agreement, if any,

even if this meant keeping Continental out of the

Sacramento market. Therefore, if the evidence shows

nothing more than such an agreement between

Sylvania and Handy Andy and steps taken by Syl-

vania to fulfill its commitments under that agreement,

you must find that the challenged locations practice

[1160] does not violate the antitrust laws.

Re ARAB Rh Oe UES ARS

Refused:

Given as Modified :

United States District Judge

Joseph E. Seagram & Sons, Inc. v. Hawatian

Oke and Liquors, 416 F.2d 71 (9th Cir. 1969)

Packard Motor Car Co. v. Webster Motor Car

Co., 243 F.2d 418 (D.C. Cir. 1957)

U.S. v. Arnold Schwinn & Co., 388 U.S. 365

(1967)

Ace Beer Distributors, Inc. v. Kohn, Inc., 318

F.2d 283 (6th Cir. 1963)

Top-All Varieties, Inc. v. Hallmark Cards, Inc.,

1969 Trade Cas. 172,850 (S.D. N.Y. 1969)

[1269] SyLvAaNnra AND MAGuIRE’s

REQUESTED J URY INstRUCTION No. 30C

[ RepLaces 30B]

Furthermore, in evaluating the question of whether

or not the challenged location practice unreasonably

restrains competition, you should also understand that

under the antitrust laws it is lawful for a manufac-

turer, in franchising a particular dealer or dealers to

be retail dealers in the manufacturer’s products, to

designate the location or locations of the place or

places of business for which said dealer or dealers are

franchised. It is also lawful for the manufacturer

to decline or refuse to grant a dealer’s request for

a franchise at a different location.

Given:

Refused : ae

Given as Modified:

United States District Judge —

U.S. v. Arnold, Schwinn & Co., 291 F.Supp.

564, 565-66 (N.D. Ill. 1967)

[1161] Syivania AND MAGUIRE’s

REQUESTED JurRY INstTRUCTION No. 31 (REVISED)

Therefore, if you find a contract, combination or

conspiracy to establish or enforce sales distribution

restrictions on locations at which Continental and/or

other dealers may sell products, you must further

resolve the question of whether such contract, com-

bination or conspiracy, if any, unreasonably or un-

duly restrained or suppressed competition or the free

flow of commerce in the Northern California or Sac-

ramento markets for television products. In resolving

this question, it is proper for you to consider, to the

extent justified by the evidence, various factors re-

lating to the purpose, operation and effects of such

practices. Thus, if such restrictions on locations, if

any, had the effect of eliminating all competition

among Sylvania dealers so that a potential Sylvania

customer would have no choice of dealers from which

to purchase television products, this fact would tend

to show that the practice unreasonably restrained

competition unless such suppression of intrabrand

competition were, in your judgment, outweighed by

benefits, if any, to interbrand competition. On the

other hand, if the practices merely had the effect of

reducing, but not eliminating, competition between

Sylvania dealers without prohibiting such dealers

from selling in territoxies more proximate to other

dealers aud thereby allowing customers reasonable

alternatives between Sylvania dealers, this factor

would tend to show that the practice did not unrea-

sonably restrain or injure competition, particularly

if such practice was adopted for the legitimate pur-

pose [1162] of increasing Sylvania’s competitive

strength against other manufacturers of television

products.

Other factors which would tend to support a find-

ing of an unreasonable restraint on competition would

be a showing that in the general markets for tele-

vision products in Northern California or Sacra-

mento the restrictions on location of Sylvania’s deal-

ers resulted in a subsiantial lessening of the number

of television outlets and brands available to cus-

tomers in such markets, or in a materially significant

lessening of competition among retail television deal-

ers in such markets, or in a substantial foreclosure

of the number of retail outlets available to other

manufacturers, or in a substantial lessening of the

number of television sets available to customers in

such markets, or in a deterioration in quality of tele-

vision products available in such markets, or in an

artificially high price level for television products

in such markets. Further facts might be a showing

that the practice was part of an effort to drive out

products of competing television manufacturers from

such markets, or a showing that Sylvania’s adoption

of such practices was not motivated by any legitimate

business purposes; or a showing that the practices

were initiated, not by Sylvania, but by dealers and

that dealers participated in Sylvania’s decisions con-

cerning franchising of locations of other dealers; or

a showing that Sylvania was adominant manufacturer

in the sale of television products in said markets and

that the purpose or effect of such practice was to

increase such market domination.

On the other hand, factors which would tend to

[1163] support a finding that Continental had not

proved an unreasonable restraint on competition would

include a showing that the practice was adopted to

serve legitimate business purposes, and particularly

to increase Sylvania’s strength as a competitor in

such markets against other manufacturers of tele-

vision products; a showing that Sylvania alone

adopted any such locations restrictions and at all

times acted unilaterally and without dealer consul-

tation or participation with a dealer in deciding

whether to franchise additional locations; and a show-

ing that Sylvania did not have a dominant share of

any of the markets involved. Further facts might

be the failure of Continental to show that such prac-

tice was adopted or resulted in the driving out of

competitors or resulted in a substantial foreclosure

of retail outlets for television manufacturers, or a

failure to show a substantially restricted number of

television brands and outlets available toe customers

in the market or the number of television sets avail-

ablt to such customers, or a failure to show materially

reduced existing competition among retail dealers in

such areas, or a failure to show a resulting deteriora-

tion in quality of television products on such market

or an artificially high price in such market.

No single one of the above factors is necessarily

conclusive. You may properly consider all of them,

to the extent justified by the evidence, in resolving

the ultimate question of, assuming joint implementa-

tion under previous instructions, whether Sylvania’s

locations practice unreasonably and unduly restrained

competition in the free flow of commerce in the mar-

kets involved. You should understand, [1164] how-

ever, that in resolving this question, it is not enough

for Continental to show simply a substantial restric-

tion, if any there be, in competition solely in the

sale of Sylvania television products. Rather, since

Sylvania’s television products were readily inter-

changeable with other television products in the area,

you should apply the factors I have previously men-

tioned to the general market for television products

as a whole (that is to say, all brands) in the particu-

lar areas I have mentioned to you and you should

decide whether such general competition in those

markets has been unreasonably restrained as a result

of the challenged practices.

eee ee ee

Refused:

Given as Modified: 00.

United States District Judge

[1270] SyLVANIA AND MaGuire’s

REQUESTED Jury INstrRucTION No. 31C

Therefore, if you find a contract, combination or

conspiracy to establish or enforce sales distribution

restrictions on locations at which Continental and/or

other dealers may sell products, you must further

resolve the question of whether such contract, com-

bination or conspiracy, if any, unreasonably restrained

or suppressed competition or the free flow of com-

merce in 1964 and 1965 in the Northern California

or Sacramento markets for television products. You

should consider such factors as whether or not the

practice eliminated or unreasonably impaired com-

petition among Sylvania dealers, whether or not any

limitation on competition among Sylvania dealers,

had a substantial adverse effect on competition among

retail television dealers in general or among manufac-

turers of television products, whether or not the prac-

tice significantly impaired or restricted the amount,

variety or quality of television outlets or television

products available to consumers in these markets.

You should also consider any benefits to competition

which may result from the challenged practice,

and also whether or not the practice was adopted

as a reasonable means of achieving any legitimate

business purposes. In this connection you should

understand that if, in view of all the circum-

stances, it is found that a practice unreasonably re-

strains competition in the market place, such a

practice would be unlawful even if there were good

business reasons to adopt it. However, the presence

or absence of legitimate business purposes is one of

the factors you should consider, along with all other

relevant factors, in determining whether the practice

does constitute an [1271] unreasonable restraint on

competition.

No single one of the above factors is necessarily

conclusive. You may properly consider all of them,

to the extent justified by the evidence, in resolving the

ultimate question of, assuming joint implementation

under previous instructions, whether Sylvania’s loca-

tions practice unreasonably and unduly restrained

competition in the free flow of commerce in the mar-

kets involved.

Given:

Refused:

Given as Modified:

United States District Judge

See Boro Hall Corp. v. General Motors Corp., 124

F.2d 822 (2nd Cir. 1942); Packard Motor Car Co. v.

Webster Motor Car Co., 243 F2d 418 (D.C. Cir.

1957); Schwing Motor Co, v. Hudson Sales Corp.,

138 F.Supp. 899 (D. Maryland), aff’d. per curiam,

239 F.2d 176 (4th Cir. 1956); Top-All Varieties, Inc.

v. Hallmark Cards, Inc., 5 CCH 1969 Trade Cases

172,850 (S.D.N.Y. 1969); Potter’s Photographic Ap-

plications Co., Inc, v. Ealing Corp., 292 F.Supp. 92,

102% (E.D.N.Y. 1968) ; L.S. Good & Co. v. H. Daroff

& Sons, Inc., 279 F.Supp. 925 (D.W.Va. 1968) ; Peer-

less Dental Supply Co. Inc. v. Weber Dental Manu-

facturing Co., 283 F.Supp. 288 (E.D.Pa. 1968).

[1272] SyLvania AND MaGuIRe’s

~ Requestep Jury Instruction No. 31D

You should understand that in resolving the ques-

tion of whether (assuming there is a contract, com-

bination or conspiracy) Sylvania’s locations practice

unreasonably restrained competition, it is not enough

for Continental to show simply a substantial restric-

tion, if any there be, on competition solely in the sale

of Sylvania television products. Rather, since Syl-

vania’s television products were readily interchange-

able with other television products in the area, you

should apply the factors 1 have previously mentioned

to the general market for television products as a

whole (that is to say, ali brands) in the particular

areas I have mentioned to you, and you should decide

whether in 1964 and 1965 such general competition in

those markets was unreasonably restrained as a result

of the challenged practices,

Ee SE Are Pee

Refused: mm"

Given as Modified: WW. —.......

United States District Judge

Packard Motor Car Co. v. Wedster Motor Car Co.,

243 F.2d 418 (D.C. Cir. 1957); Top-All Varieties,

Inc. v. Hallmark Cards, Inc., 5 CCH 1969 Trade

Cases 172,859 (S.D.N.Y. 1969); Beckman v. Walter

Kidde & Co., Inc., 1970 CCH Trade Cases 173,347

(E.D.N.Y. September 22, 1970)

[1299] SyLvania AND MaaquiRre’s

Requestep Jury Instruction No. 61

Note. This instruction is tendered for use only

if the Court decides to instruct the jury on the

theory that a restriction on the locations at which

merchandise may be sold falls within the rule

of per se illegality enunciated in U.S. v. Arnold,

Schwinn & Co., 388 U.S. 365 (1967) and is not

governed by the “rule of reason.”

If you find by a preponderance of the evidence that

Sylvania entered into a contract, combination or con-

spiracy to establish or enforce sales distribution re-

strictions which prevented dealers from selling mer-

chandise, owned by them, at any store or location in

which they chose to sell it, unless you find that such

practice was justified under the instructions I am

about to give you, you must find that Sylvania vio-

lated §1 of the Sherman Act.

However, you should understand that under the

antitrust laws it is lawful for a manufacturer, in

franchising a particular dealer or dealers to be retail

dealers in the manufacturer’s products, to designate

the location or locations of the place or places of

business for which said dealer or dealers are fran-

chised. It is also lawful for the manufacturer to de-

cline or refuse to grant a dealer’s request for a fran-

chise at different or additional locations. Therefore,

in order to find that Sylvania has violated the anti-

trust laws it is not enough to find a contract, combi-

nation or conspiracy under which Sylvania restricted

the locations at which dealers were franchised to act

and hold themselves out as authorized dealers in

Sylvania products. In order to find for Continental,

you must find that Sylvania engaged in a contract,

combination or conspiracy to establish or enforce sales

distribution restrictions which [1300] prevented deal-

ers from moving merchandise, owned by them, to

non-franchised locations, or from selling such mer-

chandise at non-franchised locations.

If you find such a contract, combination or con-

spiracy to restrain movement or sale of merchandise,

such a practice would be presumptively unlawful.

However, before you can find it to be a violation of

the antitrust laws, you must consider whether it was

justified, In this case, such a restriction would be

justified if Sylvania has proved by a preponderance

of the evidence that the adoption of such a restriction

was reasonably necessary to enable Sylvania to re-

main in the television business or to enable it to in-

crease the strength and effectiveness of its competitive

efforts in the television industry. If you find that

such justification has been shown, you should find

that Sylvania and Maguire have not violated the

antitrust laws. If you find that Sylvania has not

proved such a justification by a preponderance of

the evidence, and if you find the existence of a con-

tract, combination or conspiracy to restrict movement

or sale of merchandise, as I have defined it above,

then you should find that Sylvania has violated the

antitrust laws.

(aE Say Ee ere

Given as Modified: .... .

United States District Judge

U.S. v. Arnold, Schwinn & Co., 388 U.S. 365

(1967)

[1301] Federal Trade Commission Staff Re-

port on Franchising, at 30 (December, 1969)

(See discussion in Sylvania and Maguire’s

Memorandum at pages 16-17) ;

U.S. v. Arnold Schwinn & Co., 291 F.Supp.

064, 565-66 (N.D. Ill. 1967)

DOCUMENTARY EVIDENCE

Pltfs. Ex. 3

SyLvaAnra Evectric Propucts Inc.

Home & CoMMeERcIAL ELEcTRONICS DrtvisIon

This Agreement made the 19 day of March, 1964

between Sylvania Electric Products Inec., Home &

Commercial Electronics Division, 700 Ellicott Street,

Batavia, New York, a corporation organized and ex-

isting under the laws of the State of Delaware (here-

inafter referred to as “Sylvania”), and Continental

TV, Inc. (Hereinafter referred to as “Dealer”),

WITNESSETH:

In consideration of the mutual covenants herein

contained, the parties hereto agree as follows:

1. Sylvania is pleased to appoint Dealer as an

authorized Sylvania dealer of television receivers,

stereo high fidelity reproducers and radios bearing the

trademark “Sylvania” offered for sale by Sylvania

from time to time during the term hereof and in-

tended for home entertainment uses (hereinafter

“merchandise”).

2. Sylvania will endeavor at all times to:

(a) provide the finest merchandise which will of-

fer dealer a fair profit opportunity ;

(b) present strong and energetic merchandising

programs ;

potential.

3. Dealer agrees to maintain an adequate stock

and representative display of merchandise. Dealer fur-

ther agrees to maintain an adequate inventory of mer-

chandise and to promote vigorously and effectively the

sale of merchandise.

4. Dealer agrees to maintain and render at Deal-

er’s expense proper installation and service on mer-

chandise in accordance with the installation standards

and service policies established by Sylvania from time

to time,

5. Dealer agrees to abide by advertising and pro-

motional policies as from time to time established by

Sylvania.

6. Sylvania shall not be liable for failure to ship

any merchandise in any accepted order becaus of

reasons beyond its control including but not limiud

to strikes, differences with workmen, accidents, fires,

shutdown of its manufacturing plants or plants sup-

plying it, governmental orders, riots, floods, acts of

God, embargoes, inability to secure transportation

facilities or contingencies arising out of or due to

national defense activities, war or emergency con-

ditions.

Delivery of part of an order does not obligate

Sylvania to make further deliveries, and Sylvania

reserves the right to reject any order in whole or in

part. Sylvania also reserves the right to allocate its

inventories and current production in any way deemed

by it to be desirable.

7. Dealer agrees to mail and render to Cylvania

on and in accord with forms and instructions provided

by Sylvania, all such reports, periodical or otherwise,

of stocks, sales, and such other pertinent information

relative to Dealer’s inventory of merchandise pur-

chased from Sylvania as Sylvania may from time to

time request.

8. Dealer agrees to use trademarks or trade names

of Sylvania in advertisements, letterheads, or other-

wise only as may be approved by Sylvania from time

to time in writing, but Dealer shall acquire no rights

under this agreement in any such trademarks or trade

names, and Dealer, upon termination of this agree

ment further agrees simultaneously therewith to dis-

continue all uses of such trademarks and trade names.

Dealer, for the duration of this agreement and

thereafter will do nothing that will in any way in-

fringe, impeach or lessen the value of the patents,

trademarks or trade names under which any of such

merchandise is sold, or do anything that will tend to

prejudice the reputation or sale of any such mer-

chandise.

9. During the term hereof the relationship be-

tween Sylvania and Dealer is solely that of vendor

and vendee ; the Dealer, its agents and employees shall,

under no circumstances be deemed agents or repre-

sentatives of Sylvania for any purpose whatsoever and

Dealer shall have no right to enter into any contracts

or commitments in the name of, or on behalf of,

Sylvania, or bind Sylvania in any respect whatsoever.

10. This agreement is executed in and shall be in-

terpreted according to the laws of the State of New

York.

11. This agreement contains the full agreement

between the parties, and Dealer and Sylvania declare

and agree that there are no other terms or conditions,

representations or understandings except those set

forth in this agreement.

12. Terms of sale are net thirty (30) days.

The Dealer agrees to mail to Sylvania’s Credit De-

partment, financial statements and information from

time to time as required by the latter. Sylvania re-

serves the right at all times, either generally or with

respect to any specific order by the Dealer, to vary,

change or limit the amount or duration of credit to

be allowed the Deaier.

13. This agreement shall continue in force from

the date hereof until terminated for any reason what-

soever by either party hereto upon ten (10) days

written notice to the other. In the event of cancella-

tion of this agreement, Sylvania is hereby granted

the option to repurchase any unsold merchandise in

Dealer’s inventory at Dealer’s invoice price.

14. With respect to all merchandise purchased by

the Dealer from Sylvania hereunder, the Dealer

agrees that, upon the release thereof, it will deliver

22 23

therewith such printed warranties or guarantees with Deft. Exhibit C

respect to such merchandise as shall be furnished by D.STRICT SECTION I

Sylvania to the Dealer for that purpose. The Dealer Tore on Sawxtee Naw Accounts

further agrees that Sylvania’s obligations to the Deal- Ix SLD. M

er with respect to all snerchandise purchased by the es 7h ;

Dealer from Sylvania hereunder shall be as set forth L..-- Determine the size of each prospective ac-

in the aforesaid printed warranties or guarantees fur- count in the market.

nished by Sylvania and that the Dealer will not — Re Rate each Dealer on the basis listed below.

purport to obligate Sylvania by issuing any other Basis: TV Units—Annual Total Store Sales:

warranties or guarantees with respect to such mer-

lassi «sT'V' Units TV Units Annual TV $ Avg. Units

chandise. ja Annual Rate Weekly Rate ($133 Avg.) Per Class

In Witness Whereof these presents have been exe- C 0- 25 (0)-1*EOW x 0/$ 3,325 15

cuted as of the day and year first above written. B 26-129 (1) EOW-24wk $ 3,458/$17,157 65

Sy.vanta Exectric Prop ; A 130-389 2.5 wk-7.4 wk $17,290/$51,737 195

DIvI3I0n *EOW—(Every Other Week)

By: R. J. Theis The types of accounts we want for our District Pro-

CONTINENTAL TV, Inc. gram are: Types “AA” and “A”,

By : Geo. N. Shahood To determine the potential of the account, ask these

two questions:

| ee How many TV do you sell a year?

Bees How many TV do you average per week?

From either of the two answers, arrive at your classi-

fication (per above).

Note: In some cases, Type “B” accounts may be added

to our SLD Program—but, primary emphasis

should be directed to “AA” and “A”,

We Must Get a Minimum of Three (3) Sets per Week

From Each Account!

What happens to the total territory, based on this

minimum of three (3) TV units per week per ac-

count ?

B <5 4's Establish a base of 30 dealers—‘AA” and

“A” types, as quickly as possible.

D6 «eas Three (3) units per week of 150 units per

year—gives you a TV volume in your ter-

ritory of:

$133 (Avg. Dealer Cost) x 150 units =

$20,000 a yr. X 30 dealers = $600,000.

es 6-0 Obviously, Stereo/Radio business is in addi-

tion to this or—if necessary—it will make

up some part of the $20,000 per account

minimum goal.

To reduce the total job per dealer into a plan of

action—the target should be as follows: (Approximate

numbers used).

ee January Display Program: 30 units

(This leaves two 14-set orders prior to

June) = 58

Des isa June Display Program: 45 units.

(This leaves three 14-set orders prior to

January) = 87

Total TV Units Per Year: = 145

Note: Keep in mind—It is important to groove the

account into buying 14-units at a time. You

should call on the Sylvania dealer no less than

every 4/5 weeks. He MUST be encouraged to

maintain his minimum selling rate of 3-units

per week. IF he is a “believer”—a 14-set order

will be ready no later than every 5-weeks. IF

NOT—determine the problem and take correc-

tion action!

How Much “Elbow Room” Is There, Really, In Our

Program .... ?

Use the following industry statistics as evidence of

our limited number of dealer-approach. NOTE: We

give SUPER “elbow room”—while “elbow room” is

adeqnvate to make the program a success,

Deft. Exhibit F

SALES SECTION II

SLD Program

1A—The Franchise—Sylvania Home Entertainment

Products are only sold through franchised dealers,

properly trained and well equipped to sell the mer-

chandise.

The franchise is not a meaningless paper that puts

the dealer in a profit squeeze with weak competitors.

The franchise is based on stability of direct factory

relationship, with a strong straight forward program

of policy and understanding. The franchise contains a

good profitable selling climate by creating “elbow

room” in a sensible territory based on market and

dealer potential. “Same brand” competition is elimi-

nated.

2A—The Pricing—The Sylvania Home Entertainment

Product is realistically priced to the franchised dealer

and, consequently, can be sold competitively and prof-

itably in the market place.

The Product is priced to include freight and the

quantity prices are available to all franchised dealers,

regardless of size or market geography. The savings

and efficiency, made possible by the SLD Program, .

are evidenced by any price comparison with any other

Product of comparable quality.

3A—Financing—Sylvania offers the dealer the finest

method of financing in this industry .... . The J. P.

Maguire Plan (See Management Section—Check List

Number 19). This plan offers the easiest financial

method of maintaining a representative display of the

Sylvania Product—A tremendous plus factor in our

program,

B. Straight Line Distribution (S.L.D.)

Straight Line Distribution is Sylvania’s concept of

the proper way to distribute and market products in

the metropolitan markets. It incorporates the best

thinking . . . most up-to-date ideas . . . finest com-

inunications—between factory and dealer yet devised.

It Is The Industries Finest Factory Direct Program.

S.L.D. is designed for the present and for the future.

It gives Sylvania better control of its distribution,

reduces distribution costs and gets the Sylvania mer-

chandise to the dealer and the ultimate consumer—

at the most competitive prices.

Profit opportunity is a Prime factor in the mind of

the dealer today. S.L.D. guarantees the dealer that he

always buys right from Sylvania—because the price

' is the same Everywhere in America, Our price sheets

are printed at our headquarters in Batavia, Dealers

ean be sure that they are buying “right” from Syl-

vania—365-days a year.

S.L.D. also eliminates “same brand competition”. Syl-

vania wants fewer dealers and—quality rather than

quantity. By not over-franchising, Straight Line Dis-

tribution eliminates vicious price cutting and estab-

lishes suggested “go” prices that enables each dealer

to make a fair profit and each consumer to receive an

outstanding value.

“Elbow room” gives every Syivania dealer a geo-

graphig area in which to sell our Sylvania products.

S.L.D. does not promiscuously franchise dealers with-

out first studying their size, location and effect on the

market (as well as other Sylvania dealers in the area).

By franchising dealers by territory—Sylvania be-

comes an important profit factor to its dealers. This

creates good relationship and proper respect—between

factory and dealer.

Six modern, major product distribution centers serve

the needs of our customers, These centers contain a

complete mix of strategica!ly located inventories of

all Sylvania Home Electronics products. All Tele-

vision and Hi-Fi sets are shipped to the dealer—

freight prepaid.

Proper communication is a vital part of our 8.L.D.

Program. Each of our six modern distribution cen-

ters is connected by a direct line with our factory in

Batavia and the central billing system in Camillus,

New York.

There is a credit manager and an order/billing man-

ager at each of these distribution centers to handle

the needs of our Sylvania customers. In addition, each

District Sales Manager lives in the heart of the terri-

tory he covers and can easily be reached by all Syl-

vania §.L.D. dealers.

Deft. Exhibit BV

YLA045- CTV CLA 9/8/65

T RIVERS

PLS ADV CURRENT SITUATION REGARDING CONTINENTAL TV

AND REQUEST FOR FRANCHISE (SACRAMENTO) I HAVE

HELD LAST ORDER PENDING HEARING FROM YOU

K LOPOLITO LOSA

TESTIMONY OF THE WITNESSES

(Citations Are To Reporter’s Transcript (RT) )

Testimony of Lee French

[15] ** * Mr. Miller: Q. Okay, now, Mr. French,

as you have indicated, the S.L.D. program is indeed

set forth in the manual. It is marked in Exhibit F,

Your Honor. Let me show you that, Mr. French.

Now excerpt of it is entitled “S.L.D. program,”

and it says in substance this:

“The franchise—Sylvania Home Entertainment

Products are only sold through franchised dealers.”

“The franchise is not a meaningless paper that puts

the dealer in a profit squeeze with weak competitors.”

It goes on to say: “The franchise contains a good

profitable selling climate by creating ‘Elbow room’ in

a sensible territory based on market and dealer poten-

tial. ‘Same brand’ competition is eliminated.”

It goes on to say in the fourth paragraph: “The

savings and efficiency, made possible by the 8.L.D.

program, [16] are evidenced by any price comparison

with any other product of comparable quality.”

It goes on to say in the fifth paragraph: “Financing

—Sylvania offers the dealer the finest method of

financing in this industry. ... The J. P. Maguire plan

(see management section—check list number 19). This

plan offers the easiest financial method of maintaining

a representative display of the Sylvania product—a

tremendous plus factor in our program.”

Now, continuing, Mr. French, on the next page, this

policy statement says:

“Straight line distribution (S.L.D.) +

“Straight line distribution is Sylvania’s concept oi

the proper way to distribute and market products in

the metropolitan markets.”

It goes on to say in Paragraph 2, sir: “It gives

Sylvania better control of its distribution.”

And it goes on in Paragraph 4: “S.L.D. also elim-

inates ‘same brand competition.’ Sylvania wants fewer

dealers and—quality rather than quantity. By not

over-franchising, Straight Line Distribution elim-

inates vicious price cutting and establishes suggested

‘so’ prices that enables each dealer to make a fair

profit and each consumer to receive an outstanding

value.”

And Paragraph 5 says, “Elbow room” gives every

[17] Sylvania dealer a geographic area in which to

sell our Sylvania products. S.L.D. does not promis-

cuously franchise dealers without first studying their

size, location and effect on the market (as well as

other Sylvania dealers in the area).

“By franchising dealers by territory—Sylvania be-

comes an important profit factor to its dealers.”

Mr. French, then we go down to Paragraph 7———

Mr. Popofsky: Maybe you would read the last

sentence. |

Mr. Miller: “This creates good relationship and

proper respect—between factory and dealer.”

Now, Mr. French, this statement of policy was con-

tained in the manual of 1963, was it not?

A. I believe it was, yes.

[Continued on next page; nothing omitted. ]

[18] Mr. Miller: TI offer this as our next exhibit

in order, Your Honor.

* * *

[19] * ** The Clerk: This is marked Defendant’s

F. Would you like this to be introduced as Defend-

ant’s F'?

Mr. Miller: Just F. It will be Continental’s F.

Mr. Popofsky: We have a problem with plaintiff,

defendants, cross-claimants and cross-defendants and

all that.

The Court: I understood we were going to desig-

nate vou as claimants.

(Claimant’s Exhibit F marked and received

into evidence.)

Mr. Miller: Q. T have handed you a document

which has heen premarked as Exhibit C, and turning

to the seeond page, at the bottom, the policy state-

ment says: “How much elbow room is there really in

our program? Using the following industry statistics,

evidence of our limited dealer approach, note, we give

super elbow room while elbow room is adequate to

make success.”

Was that policy statement contained in the manual

in 1963, sir?

A. I don’t remember it exactly. I would assume

that it is if the page is from the manual.

Q. Thank you, sir. And the manual is in loose-leaf

form or was, was it not?

[20] A. I believe it was.

Q. And it was supplemented from time to time

with further policy statements and procedures—check

list and so on, was it not? A. Yes.

Mr. Miller: We would offer claimant’s C next

in order, Your Honor.

Mr. Popofsky; No objection subject to the clean-

ing up process.

“ee ae It’s understood it will be cleaned up.

(Claimant’s Exhibit C marked and received in

evidence. )

Mr. Miller: Q. Now, Mr. French, when you got to

the West Coast and became the District Sales Man-

ager for this area, you went about franchising deal-

ers under the SLD program, did you not, sir? A. Yes,

“"e And basically, you followed the instructions in

the manual? That is to say, you contacted a proposed

franchisee, you told him about the SLD program, is

ihat correct? A. Yes, in my own words.

Q. Yes. And you pretty much followed the sub-

stance of what the manual contained regarding the

SLD program, isn’t that right?

[21] A. In essence—I believe you could say that.

Q. Okay. Now, this elbow room policy was not part

of the old distribution plan, was it, sir? A. What

old distribution plan?

Q. The old distributorship—factory and the inde-

pendent distributors? A. In what way—oh, there’s

a lot of different things. There’s a lot of differences

in this type of distribution than there is in the fac-

tory—factory branch distribution. Yes, there’s a lot

of differences.

Q. Let me put it this way. Do you have any per-

sonal knowledge as to the manner in which the terri-

tories. to which you were assigned were created by the

national sales department? A. I was not present

when they were drawn up. I don’t know exactly how

they were designated or in what manner each terri-

tory was drawn up on.

Q. Well, what I’m getting at, Mr. French, is it

not a fact, sir, the elbow room policy came into exist-

ing and was introduced as part of the new SLD ap-

proach that Mr. Theis and Mr. Morgan installed iv

1962? <A. Yes.

Q. Now, under this SLD elbow policy, each dis-

trict sales manager, such as yourself, ha” vretty much

complete discretion and control, sir, as .. whom you

would franchise [22] as a Sylvania dealer, isn’t that

so? <A. Yes,

aaes

Q. Now, in other words, you also had this kind of

complete control over the location, the dealer location,

isn’t that right, that you wished to have? A. Yes.

* % *

[23] *** Q. Mr. French, I believe you mentioned

when you got to the West Coast here in 1963 tha‘ you

set about to franchise dealers, is that correct?

A. That’s true.

Q. And for the first time, at least in your mem-

ory, you used a written franchise agreement, correct,

sir? A. Yes, sir. |

Q. Now, it is a fact, is it not, that a franchise

agreement did not contain a location clause? A. It

did not contain a location clause.

Q. But you did verbally speak to each dealer you

franchised about location, did you not? <A. Yes, sir.

Q. And as a matter of fact, each dealer was ver-

bally notified at the time he was franchised as to

exactly and precisely which location ‘was being fran-

chised, isn’t that right? A. Yes, sir.

* a7 *

[24] *** Q. Let me restate the question for you,

Mr. French. A. All right. 7

Q. As you franchised these dealers in 1963, sir,

you verbally notified them precisely which of their

locations was being franchised by Sylvania, is that

right? A. By me?

Q. By you. A. Yes.

I am franchising them, and I am the one who had

control of my territory subject to the approval of my

peers. Yes, I am the one who was saying, “Well, this

is the location that I am franchising.”

Q. And you didn’t put that in writing? A. No.

Q. You didn’t do that did you? A. No, it’s a

verbal agreement.

Q. Verbal agreement with each particular dealer

at [25] the time you franchised them, correct?

A. This is true. ¢

Q. And that practice continued from 1963 on

through at least 1965, didn’t it? A. Yes.

Q. Now, any given dealer that you franchised in

1963, you verbally told him, “Mr. X, I’m franchising

this location, and this location only.”

If that dealer subsequently, Mr. French, in 1964

opened another store, branch store, what was vour

practice? A. I asked him to let me know where it

was, and possibly we could negotiate a franchise for

it, or that I would be willing to talk to him about it.

I believe this is the answer you want.

[26] Q. Let me put it this way, Mr. French.

Under the example I have just given you where the

dealer who you verbally franchised first—he has a

main store-—has a branch store subsequently——

A. Right.

Q. it is necessary for him to seek approval

from you before he can be considered a franchised

Sylvania dealer at his branch store, isn’t that right?

A. Right.

Q. And it is against Sylvania poliev for that dealer

to move merchandise into that branch store and sell it

before he gets approval for a franchise from you,

isn’t that right? A. Against Sylvania’s policy?

Q. Yes, sir. A. I can’t say definitely that it is

against Sylvania’s policy. It’s against my policy.

I wouldn’t want it to maintain a decent relation-

ship with the dealer.

Q. You wouldn’t do it any other way? A. Right.

Q. As a matter of fact, that was your policy in

1963, was it not? A. Right.

Q. Okay. And that continued to be your policy in

[27] 1964 and and 1965——- A. Right.

Q. ——in your territory? A. Right.

Q. Is that right? A. Right.

Q. And when you would franchise the branch

store, you would do’ so verbally, would you not?

A. That is right.

Q. And—— A. To the dealer.

Q. Excuse me? A. To the dealer.

Q. To the dealer owning the store? A. Yes.

[30] *** Q. Is it a fair statement to say if you

told us under oath in your deposition that you had

five or less dealers in Santa Clara County in 1963

that that would be a better recollection than you would

have presently? A. Absolutely.

Q. Thank you.

How about Alameda County?

Can you estimate for us how many dealers you had

there in 1963? A. There were five there approxi-

mately.

Q. How about Contra Costa County? That was

your territory? A. Yes.

_ Q. How many dealers there in 1963? A. Maybe

four.

[31] Q. And how about San Mateo?

How about San Mateo County? A. Five possibly

—maybe six.

Q. All right. You said in 1966 under oath in your

deposition you had two dealers in San Mateo County.

Does that refresh your recollection? A. If that is—

okay.

Q. How would you describe Sylvania’s market

share in your territory in 1963? A. Somewhere

around five perecent—maybe less.

Q. Overali? A. One percent possibly.

Q. Now, in your deposition in 1966, under oath you

testified that Santa Clara market penetration was

about three to five percent; San Mateo and Alameda

being about half that. Would that refresh you at the

present time? A. Yes.

Q. Does that seem accurate to you? A. I have

an idea in my memory it was a little better than it is

now.

Q. You didn’t have a dealer in Salinas in 1963,

did you? A. No.

* * *

[36] Q. All right, when was it that you would say

there was substantial increase in the color demand

in the territory? A. Probably in the fall of °64,

probably.

Q. During 1964 at some point? <A. T believe so.

Q. And that continued to 1965, did not it?

A. Yes.

37.

Q. And that demand increased in 1965, did it not,

sir? A. Yes.

Q. And increased steadily from January 1965

through September 1965, is that correct? A. Yes.

Q. And until about September or October of 1965,

there was a tremendous, unprecedented demand for

color merchandise on behalf of dealers, isn’t that a

fair statement? A. The matter of supply and de-

mand was a real factor, yes. There was more of a

demand than the manufacturers were able to supply

at that time.

Q. When did Sylvania first have a full line, all

flavors and models of color television merchandise?

A. That is a pretty broad statement, really. There

are some flavors they still don’t make.

[37] Q. Ali right, let’s take it by year. In 1963

you testified Sylvania did not have a very complete

color line, is that fair? A. That is right.

Q. In 1964, what was the situation? A. In 64,

I believe it was in June of ’64 that we introduced a

more complete color line.

Q. All right, sir, now you mentioned June of '64;

is it not a fact that June of each year is the intro-

duction date for the next following year’s models?

A. I believe so, yes.

Q. And to your knowledge that is an industry

practice, is it not? A. Right.

Q. Just like car models? A. This is true.

Q. So in June of 1964, the 1965 line of television

models would be introduced? A. Yes.

Q. And in June of 1965 the 1966 line of television

models would be introduced? A. That is right.

Q. All right, now, you mentioned this unprece-

dented market that commenced in September and

October of 1965. Was Sylvania caught in the manu-

facturing bind also? [38] A. In 1965?

Q. Yes, sir. A. Yes.

Q. Would you describe for us generally the situa-

tion that existed for Sylvania as of October 1965?

A. Yes, I believe we went on dealer allocation, as

far as color sets.

Q. Do you have any knowledge as to whether or

not any other manufacturer went on allocation also?

A. I think almost all of the manufacturers. T can’t

say for sure but I believe they were.

Q. And what do vou mean by allocation? A. T

mean that the factory was only able to produce a

given number of color television sets to supply their

existing franchise dealers.

Q. So that they rationed them? A. An equitable

share to each dealer had to he on an allocated basis.

Q. How long did that shortage basis last, Mr.

French? <A. Probably a year. I don’t believe it was

much longer than that.

Q. About a year? A. I believe it was.

@. And what month in 1966 would you say it was

over? <A. Probably during the summer.

[43] * * * Q. Okay, did you explain the Elbow

Room policy to Mr. Shahood on that oeeasion? A. T

believe that T went into the Elbow Room Policy, yes.

Q. You told him in essence you were not going to

establish a dealer close to him in that market area?

A. I did not exactly say that I was not going to put

a dealer in his area. I said that I was looking for

a given amount of penetration in each market area.

That if I was getting that, I certainly was not solicit-

ing dealers from that given area.

Q. I would like to refer, if it please the Court and

counsel, to Page 112 of \.rv. French’s deposition, taken

on May 23, 1966, commencing Line 21.

“Mr. Miller: Q. Thereafter, did you meet

him at his store or his proposed store location ?

“A. Yes, I went in to San Leandro.

“Q. San Leandro is part of your territory,

right ? .

[44] “A. Right. *

“Q. And what was the substance of your dis-

cussion—” Continuing on Page 113—“at that lo-

cation ?”

“A. The general substance of the discussion

‘with any dealer that I go into franchise is explain

our policy and programs of merchandising. That

we are a factory direct organizatio.. That I had

a large territory to cover. That I was not able

to put dealers right next door to each other and

T had to establish dealers in certain areas that

were going to get me the volume and a good mer-

chandise turnover and display for that particular

area. That it was necessary to put in a full line

display of the merchandise.

“That we feel that a dealer is entitled to a fair

profit margin in merchandising Sylvania, and we

liked to do business with that type of dealer.”

Mr. French, does that impress you——-

* * *

[46] * * * Mr. Miller: Q. Mr. French, isn’t it

a fact after all this harangue of counsel that you did

indeed tell Mr. Shahood on that occasion that you

were not about to establish a dealer right next door

to him, if you franchised his store? A. That is

right, and I don’t believe that I denied ‘hat in my

first statement.

Q. That is in keeping with the Elbow Room Policy

as expressed in the Sylvania Sales Manual, is it not?

A. Yes.

Q. And that is what you were told the policy of

the company was, correct, sir? A. I don’t follow

that question, maybe I

Q. All right, I am simply saying that what you

told Mr. Shahood in San Leandro at your first meet-

ing with him about that subject was in keeping with

your understanding of the S.L.D. program, and spe-

cifically the Elbow Room Policy thereunder? A. It

is my interpretation the way that I can run my busi-

ness under tle existing program, yes.

Q. And it was in keeping, as far as you knew, with

that policy? A. I don’t think it was anything con-

trary to the [47] program.

Q. Right, as far as you knew at that time you were

operating under vour company policy, were you not?

A. I believe that I was.

Q. And I feel certain you continued to operate

under that policy throughout 1964 and 1965? | ee

hope that I was.

* + *

[56] ** * Q. Now, did you sign Continental TV

up to the new written franchise like Exhibit 3 at the

time you franchised the Stevens Creek store?

A. No.

Q. It was not the policy of your company to do so,

was it? A. No.

Q. In other words, after the original written fran-

chise bore a given location, each additional franchise

was granted verbally, isn’t that correct? A. Ver-

bally I notified them as far as the credit department

was concerned and as far as our sales office is con-

cerned.

Q. And did that by memorandum? A. On an

order. On an order. On placing an order, which was

at the Stevens Creek Store. The order was placed

directly to be delivered to this address.

Q. Let’s suppose you have decided to franchise a

given dealer. Who in the sales department must ap-

prove your decision? A. It would be my immediate

supervisor.

[57] Q. In 1964-1965, Mr. Don Carroll, regional

sales manager, correct? A. That’s correct.

Q. And how was vour request for approval com-

municated to Mr. Carroll in 1964—you know, in gen-

eral? A. On the telephone, I believe.

Q. Verbally? A. Through telephone conversa-

tions.

Q. Generally it was not in writing, was it?

A. No.

Q. What other approvals in the sales department

were necessary when vou decided to approve a dealer

in your own territory? A. It depends on cireum-

stances, I believe, but on this particular incident, I

just notified Don Carroll of the store and the location.

Naturally it was one of the finest looking stores. I was

proud to be able to have it as a franchise location.

I made quite a point of it.

Q. Did Mr. Carroll have any objection to this

store? A. If he did, he never mentioned any.

Q. Well, did he not Say in essence, it’s fine with

me. We need help here? A. Well, in essence, yes.

He never had any objections.

[58] * * * Mr. Miller: Q. In general, would

there need to be any approval above Mr. Steiner in

the sales department for—— A. No.

Q. Just a moment. A. Not to my knowledge.

[59] Q. Okay. ——for the approval of a fran-

chise dealer within your territory ?

; You wouldn’t have to zo above Mr. Steiner, for

instance? A. I wouldn’t think so.

Q. As a matter of fact, you wouldn’t even have to

go to Mr. Steiner. Going to Mr. Carroll was gen-

erally sufficient within your own territory? A. As

far as I know. I don’t know that it goes any further

than that.

Q. And that was true in 1964 and also in 1965

wasn’t it? A. T believe go.

Q. Now, who in the credit department did you

have to zo to, Mr. French, where the dealer was in

your territory? A. T would notify Mrs. Barnes.

Q. Mrs. Barnes down here, area eredit supervisor?

A. This is right.

Q. And then after she left, Mr. Lopolito——

A. Right.

Q. ——took her place? A. Yes.

Q. Would you have to go any further as far as

you knew up to national credit level? A. I never

went any further.

[60] Q. Did anybody in the credit department

have any objection as far as vou knew’ to the Stevens

Creek franchise? A. Not to my knowledge.

Q. Doesn’t Sylvania reaily leave the decision as to

franchising a dealer in your territory entirely up to

you as that territory’s manager? A. Pretty much,

yes.

Q. In other words, if you say, “I don’t want this

particular dealer to be franchised,” generally Mr. Car-

roll, Mr. Steiner and Mr. Morgan would not overrule

you, would they? A. I never tried it really.

Q. Let me rephrase it.

You have never experienced a situation where you

did not want to franchise a dealer inside your terri-

tory but had Mr. Carroll and Mr. Steiner or Mr.

Morgan, one of those men, reversed that decision on

you—that never happened, right? A. Not to me.

Q. Never happened in all of the time you have

been in your territory, has it? A. No.

Q. Asa matter of fact, after you make a franchise

decision, you don’t hear anything from a national

department—you assume there is no objection, don’t

you? A. Yes, sir.

[61] Q. Now, excluding Continental’s case, have

von ever had an objection from a national sales de-

partment where you have franchised a dealer in your

territory—an objection about your decision to fran-

chise that dealer? A. I don’t remember any.

Q. Right. As a matter of fact, you haven’t had

any since 1963, have you, to the present time?

A. I don’t believe so.

[68] *** Q. Okay. Now, after the Stevens Creek

Store was franchised in Oakland, Mr. Shahood on be-

half of Continental TV indicated to you that he was

interested in the San Francisco market, did he not?

A. I don’t remember exactly the time it was men-

tioned. He mentioned several. I’m not sure the period

this happened, San Mateo, Oakland, San Francisco—

I believe somewhere along the line he was planning

10 or 12 stores, but I can’t be sure of the time. If

this is the time period, then I concur with it.

Q. All right. Mr. French, I’m leading up to the

period of June, 1964, the Berkeley dealer show, and

I would like to ask you, prior to that dealer show,

had you ever been informed by anybody from Con-

tinental TV that they were interested in the San

Francisco market? A. I believe this was brought up

at that time, [69] yes.

Q. Asa matter of fact, didn’t you relay this infor-

mation immediately to Mr. Carroll here? A. Yes.

Q. Right. And this was the first occasion, was it

not, where Continental TV had talked about going

ino someone else’s territory? A. Yes,

Q. And this was Mr. Carroll’s territory at this

time, correct? A. Yes.

Q. Because Mr. Carroll was handling the San

Francisco area later covered by Mr. Halliday?

A. Right.

Q. So you immediately notified Mr. Carroll of this

concept or idea that Continental was talking about?

A. Right.

Q. And as a matter of fact, when you did that,

Mr. Carroll didn’t question anything else except the

location, a proposed location? He wanted to know

that, didn’t he? A. Well, where and when, yes.

Q. Where and when. A. Yes.

Q. Correct? A. (No response.)

[70] Q. And as a matter of fact, he told you in

substance that when Continental did find a specific

location for you to notify him? A. Right.

Q. Now, that’s pretty normal in any case, is it not?

A. Yes, sir. ,

Q. That is, where a dealer who is a franchise

dealer for the first time requested franchise outside

your territory, you have got to go to someone else

for franchise approval. It’s no longer within your sole

discretion, is that right? A. That’s true.

Q. So we have a certain territorial problem then,

don’t we, sales wise? A. Yes.

Q. Now, do you remember the 1964 Berkeley dealer

show? <A. Yes, I remember it. I will do my best to

remember the thing that you want me to.

Q. Where was it held? A. At the Claremont

Hotel.

Q. And in June of 1964? A. Yes.

Q. Mr. Shahood attended? [71] A. Yes.

And you solicited a further order? A. Yes,

And it was again a small order? A. Yes.

Less than $7000? A. TI believe so.

Q. And again it was on credit terms, 30, 60, 90

days? A. I believe that this is true, yes.

Q. Do you recall on that occasion attempting to

talk to Mr. Shahood on behalf of Continental TV

about the subject of the Maguire financing plan?

A. I believe that this was made available to us at

that time, yes. I mentioned it to George.

Q. You mentioned it to Mr. Shahood? A. Mr.

Shahood.

Q. Now, Mr. Shadood was opposed to listening to

this discussion of the Maguire financing plan, isn’t

that so, on that occasion? A. Yes, I was led to

believe that?

Q. What led you to believe that? A. He said

that he wasn’t interested in the Goddamn financing

plan.

[72] Q. Okay. And in fact he wouldn’t even let

you continue your sales pitch on the plan, would he?

A. Well, this is true.

[73] Q. Okay, let me show you Exhibit G, which

is a document entitled “Sylvania Dealer Inventory-

Finance Plan, A New Concept In Dealer Financing.”

Just glance through it, Mr. French, and I will ask

you two or three questions? A. Yes,

Q. Now at some point in time you have read the

document, have you not? A. Yes.

Q. And it was contained in your sales manual at

one time, at least, was it not? A. T believe it was.

Q. And in the first paragraph it says:

OOO

“The J. P. Maguire Floor Plan.”

“The J. P. Maguire Floor Plan Program may

very well have been instituted when the dealer

was originally franchised. Despite this fact, a

complete understanding of this plan, explained in

detail in the accompanying literature, will still

be important at this point. To begin with, this

plan is a tremendous selling tool for you and

offers a buying, inventory and ‘no capital tie-up’

advantage for the dealer.

“Outline it in this manner:

“1-With this plan, Sylvania finances their

products in the dealer’s store for four months

FREE. .

“2-The dealer pays as he sells—with no cur-

tailment charges or payments prior to maturity.

[74] “3—Monthly statements are sent by J. P.

Maguire to keep dealer up to date on account.

“4--At the end of a four month period, the

dealer has the option of paying unpaid balance

or extend financing for a 30 day period at %4 of

1 pereent—this may follow on the second 30 day

period.

“5 To control inventory, IBM ecards are sent

to cover each unit, serial number and cost. On

the dealer’s copy of the trust receipt schedule

date of sale and the date of payment may be

noted.”

Tt continues on the second page:

“For a dealer to participate under this pro-

gram, the following forms must he signed by the

dealer principal. Responsibility for having these

forms signed and mailed to Area Credit Super-

visor rests with the Sylvania District Sales Rep-

resentative.”

Now, the District Sales Representative in this case

in your territory was yourself, correct? A. That is

right.

Q. And then it lists several forms.

“1—-The order—(Bill and ship to dealer)

“2—Signatory Authorization

“3—Dealer information forra in triplicate

“4—Statement of Trust Receipt Financing in

triplicate.

[75] “5—Personal Guaranty (if required)

“6—Franchise in duplicate

“T7—Dealer Application in duplicate

“8—Financial and Operating Statement.”

All right, now, so this plan is outlined in your

sales manual as the plan that you were soliciting

dealers to accept after June of 1964, isn’t that so?

A. The word “soliciting” kind of throws me a lit-

tle bit. I was proposing it to the dealer but as far as

soliciting actually to force a dealer into it, no.

Q. You felt that it was an advantage for some

dealers? A. To some dealers it would be an advan-

tage.

The Clerk: Introduced and admitted in evidence.

[Inventory Finance Plan, marked Claimant’s

Exhibit G for identification was received in

evidence. }

* — &

[81] * * * Q. What was the purpose of the dealer

information form? A. To list the dealer himself

and the location, I believe.

Q. Okay, all right. And this one is made up for

Continental T.V., Incorporated, dated July 14, 1964,

and it lists a corporation, Continental T.V., Incorpo-

rated, principal place of business: Stevens Creek

Boulevard, and another place of business is on Santa

Clara Street, and a third place of business is in San

Leandro, so at this time there were three stores ap-

parently franchised, is that correct? A. Yes.

Q. Now, was it the Sylvania policy to fill out one

of these dealer forms every time a new store was

franchised? [82] A. No, sir.

Q. It just so happened at the time that this docu-

ment was prepared these stores were open and they

were listed? A. That is true.

Q. As the Oakland or San Francisco store opened

thereafter, they were not placed upon a sheet of this

type? A. No.

Mr. Miller: Q. Now, as a matter of fact about

the time that you left these documents which we just

put into evidence with Mr. Shahood, you told him that

the use of the Maguire would aid Continental T.V.’s

expansion into a chain of stores, did you not? A.

If it were approved by credit that this would be ad-

vantageous, I believe I did, yes.

Q. Right; in other words, you were just telling

him simply what the fact was, isn’t that right? [83]

A. Right.

Q. And you believed it to be true? A. Provid-

ing, I—again, there is eredit approval.

Q. Certainly. These questions I am asking you,

you may assume that I am including in them subject

to whatever credit review we find later from other

witnesses is necessary.

So you did in substance tell Mr. Shahood of Conti-

nental that this would enable Continental T.V., at

least enhance the possibility, increase the possibility

7 —e T.V.’s expansion inte this chain that

Mr. Shahood was talkin rou, 1

_ g about to you, is that right ?

Q. Of course, at the time that you and Mr. Sha-

hood discussed that type of an advantage connected

with the Maguire Plan, Mr. Shahood still had not

signed these documents, had he? A. No, sir.

Q. Of course, after the date appearing on these

Maguire Plan documents, which is about the middle

of July of 1964, I assume that the Maguire Plan was

approved for Continental T.V., is that correct ? A

To my knowledge, yes. ;

Q. And upon approval Continental placed its first

substantial order, do you recall that? A. Yes.

[84] Q. It was a earl

Frage BiG nen oad or more, was it not?

Q. Of course, the two previous orders were small

around six, seven thousand dollars? A. Yes,

Q. And, in fact, this merchandise was shipped to

both franchise locations, there were three, there was

a small store downtown but by both IT mean San

Leandro and Stevens Creek? A. JT believe it was

yes.

a. Okay, now, you heard more about San Fran-

cisco and Continental T.V.’s desire to operate a store

in that territory after the Maguire Plan was ac-

cepted, did you not? A. Yes.

Q. And you heard it from Mr. Shahood, did you

not? A. I heard from Mr. Shahood?

Q. Yes. Sometime before the end of the year in

1964, did you not become aware of a specific location

that Mr. Shahood wanted Continental to operate

from in San Francisco? A. Sometimes in 1964, yes.

Q. Okay, and what did you do with that informa-

tion when you heard it? A. I passed it on to Mr.

Carroll.

Q. And you did so immediately, didn’t you? [85]

A. Yes, sir.

Q. Mr. Carroll was still your immediate superior?

A. Yes, sir.

Q. I suppose he still is at the present time? A.

Yes.

Q. And you told Mr. Carroll in substance that

Continental had found a location on Geary Street?

A. Yes, sir.

Q. This was before Continental had opened the

store, right? A. Correct. ;

Q. What did Mr. Carroll say about this? A. I

don’t remeinber what he said. I think he wanted to

look at it. It sounded all right or it sounded like

a good location, or “Let’s take a look at it.” I can’t

remember.

Q. Now, at or about the time that you talked

to Mr. Carroll about San Francisco for Continental,

you did look at the location on Geary Street person-

ally, didn’t you? A. Yes.

Q. And you did not have any objection to Conti-

nental locating at that point or that location in San

Francisco, did you? A. No.

. Q. It was out of your territory? [86] A. Yes,

sir.

Q. So you could have no discretion in the matter

— a company policy standpoint, could you? A.

Q. It was in the hands of Mr. Carroll and perhaps

somebody higher up? A. Yes, sir.

Q. Okay, do you recall that Mr. Carroll also

looked at the location? A. Yes.

Q. Now, did Mr. Carroll ever voice any objection

to you about Continental’s location on Geary Street?

A. Not to my knowledge.

Q. As a matter of fact, to the contra , did

that he needed help in San Francisco? ‘a I ot

80.

Q. Right; in fact, previous to the time that you

were told of the specific 3210 Geary Street location,

Mr. Carroll had repeatedly asked you if Continental

had found a location, or what was Continental doing

about San Francisco; he had asked you about that

previous to the location specification? A. It is pos-

sible that he asked me most any time that we had con-

versation if I had anything definite to report on it,

yes.

[87] Q. As a matter of fact, he was quite anx-

ious, was he not, to have Continental establish itself

in San Francisco at that time, he expressed that to

you? A. We are always anxious to get more dealer

store locations, good dealer locations.

Q. And he expressed that to you, did he not? A.

Yes, sir.

Q. Now after Mr. Carroll saw specifically the lo-

cation himself, did he voice any objection to Conti-

nental’s doing business there? A. No, sir.

[91] Q. I understood you to say, Mr. French,

that it was your personal requirement that if it was

not approved by the other territory salesman that

you would not take the stocking order for the branch,

is that your testimony? A. I would not take a

stocking order for a branch location on someone else’s

territory.

Q. So simply what I am saying is, the other terri-

tory salesman’s approval is necessary in such a situ-

ation such as that, to your knowledge? A. Yes.

Q. Is that correct? A. Yes.

Q. And as a matter of fact, didn’t Mr. Carroil

have that same policy in San Francisco in 1964? A.

I believe so, right.

Q. And don’t you also believe that Mr. Hines had

that same policy in 1964 in his territory? A. I can

believe that he has, I can’t answer for Mr. Hines but

I would assume that it would be that way.

Q. Was that your belief in 1964? A. I ean be-

lieve that, yes.

Q. And it was your belief that these policies con-

tinued in these other territories in—from 1964 until

the present time, isn’t that right? A. I believe so.

116] * * * Q. So after Mr. Carroll in this in-

stance in San Francisco looked at the location and ap-

proved it for Continental’s store, the only thing that

was necessary was for you to tell Mr. Shahood that

it was an approved location, right? A Yes.

@. And then take an order if I needed one for that

location? A. Yes.

Q. Now, as a matter of fact, a stocking order was

placed and routinely sent through the credit depart-

ment and shipped for the Geary Street location some

time in late 1964, is that correct? A. TI believe so.

* ” *

[119] * * * Q. Okay. Now, the store on the east

side of San Jose was on East Santa Clara Street?

A. Yes.

Q. Is that correct? A. Yes, sir.

Q. And Mr. Shahood talked to you about opening

that store before it was opened and carrying Sylvania

merchandise? A. Yes, sir.

Q. And you had no ojection to that location? A.

No, sir.

@. And Mr. Shahood then just moved some mer-

chandise he had in his warehouse to the east Santa

Clara Street store and started to display it, didn’t he?

A. Yes, sir.

[120] Q. And that was with your permission?

A. Yes, sir.

Q. And you didn’t send any written notification

to Mr. Carroll, your boss, did you, that this store was

being franchised? A. No written notification, no.

Q. That’s not necessary under your policy, is it?

A. Not necessary to send a written notification, no.

Q. And it wasn’t necessary in 1964 or 1965 to send

a written notification to Mr. Carroll, was it? A.

Not to my knowledge.

Q. And what you did do, however, was merely

verbally tell Mr. Carroll that this location was going

to be franchised on the East side of San Jose in sub-

stance, isn’t that what you did? A. Yes, sir.

Q. And Mr. Carroll didn’t have any objection to

it, did he? A. No, sir, he didn’t express any ob-

jection.

Q. Of course, this was still within your own terri-

tory, the East side of San Jose, correct? A. Yes,

sir.

Q. In fact, of the four locations I pointed out to

you that Continental was operating and from which

Sylvania [121] was selling Sylvania merchandising

in 1964, only one was outside your territory, and that

was the San Francisco Geary Street store, correct?

A. Yes, sir.

Q. You say Mr. Carroll visited the Geary Street

store. What was his reaction to that store? A.

Very favorable. gee

Q. Did he make any comments to you or indicate

to you in any way as to what he thought of the size of

the store, its decor, the way Continental was display-

ing merchandise, any of these things? A. He was

very impressed with the store, the layout, the decor,

we Personnel? A. I don’t believe that he made

any comment on personnel. That I don’t recall.

Q. Was Continental displaying a full representa-

tive line of Sylvania’s merchandise? A. They were

representing Sylvania quite well.

Q. In the Geary Street store? A. Yes.

Q. In Stevens Creek? A. Yes.

[1386] *** Q. So by December, by the end of

1964, Continental had five facilities operating in that

they had had a Mission Street store, the Stevens

Creek to there east of San Jose, to the fact that they

had their Earl Street warehouse, and of course, the

Geary Street store, they had all those facilities and

you were familiar with those facilities, were you not,

sir? A. Yessir.

Q. Now, you also knew in 1964, sir, that Conti-

nental [187] TV commonly moved merchandise be-

tween the stores itself. In other words, they would

take a truck if they needed sets at the Geary Street,

they would take sets as they were available from the

warehouse and from the Stevens Creek store and

truck them up here themselves? A. Yes sir.

Q. And so commencing sometime in the late sum-

mer of 1964 you had knowledge of the fact that

Continental was doing this intrastore transfer of

merchandise? <A. Yes sir.

Q. And did you ever have any objection to that?

A. No sir.

Q. In other words, this was merchandise that Con-

tinental had purchased from Sylvania, correct? A.

Yes sir. |

Q. And had paid for under the Maguire plan. A.

Yes.

Q. And they were taking this merchandise and

using some of it in San Francisco and if they

needed to they would truck it from San Francisco

down to San Jose or even to a warehouse, correct?

A. It is possible. T don’t know of ever taking any

merchandise from a store back into the warehouse.

Q. That’s right, because they were selling a very

large volume to the public by the end of 1964, isn’t

that [138] correct? A. Yes sir.

Q. And in other words, the orders that were being

shipped by rail, as they came in they were processed

through Continental’s warehouse, sent out to Conti-

nental stores and sold, isn’t that what was happening?

A. That was the usual procedure.

Q. Right. Now, it was common and is common

and still is common for dealers with branch stores to

move merchandise back and forth? A. Yes.

Q. And Sylvania has no policy which restricts a

dealer in such conduct? A. Not to my knowledge.

Q. You have no personal policy to so restrict a

dealer? A. No sir.

Q. But it was necessary for each of those loca-

tions where merchandise was moved by the dealer to

be franchised, isn’t that right? A. As far as I am

concerned, yes sir.

Q. That’s right. In other words, if dealer X had

two locations and you had franchised, let’s say, his

location in Hayward but you had not franchised his

location, let’s say, in Berkeley, and he moved sets

from Hayward to Berkeley to the [139] non-fran-

chised outlet, that would be against your policy,

would it not? A. Against my procedures.

Q. Yes. Against company procedures correct?

A. T—TI absolutely am not sure on that part of the

policy. I believe it is necessary to have a franchise

in each location.

Q. Well, Mr. French, the company in 1964 and

1965, the Sylvania company, did not offer chain fran-

chising? A. No.

Q. That is a true statement? A. This is right.

Q. And chain franchising means what, sir? A.

To my knowledge, it means franchising one buying

office that can ship all over the United States to any

store location they want, I guess.

Q. That’s right. In other words, chain franchising

means that once you make a franchise with a man

he could open branches anywhere and you would have

no control over it? A. That’s basic, yes.

Q. And that’s not what Sylvania policy was in

64 and 65? A. That was not their policy, ves.

Q. Not allewed by Sylvania, correct? A. As far

as I know we were dealing with individuals.

[148] * * * Q. Now, Mr. French, by the end of

1964 would you say [149] it is a fair statement that

Continental became or was at that time an important

dealer to Sylvania? A. It was very important to

me.

Q. How about your company? <A. I believe that

it could be considered as important to the company

also.

Q. Had you ever had a dealer either in New York

or since you have been out here in California whose

credit line had gone from $15,000 to $300,000 in nine

months? A. No, sir.

Q. In your opinion, sir, in 1964 did Continental’s

efforts increase Sylvania’s penetration in Northern

California? A. Yes.

Q. Asa matter of fact, what portion of your total

purchases in your total (erritory did Continental ac-

count for in 1964, would you say? A. Possibly

pretty close to 50 percent.

Q. As you say, all orders were at least carload

after Maguire’s plan was accepted? A. Yes. .

Q. Now, was the color TV market becoming im-

portant in your business in 1964 compared to what

it had been in 1963? A. The latter part of 1964 I

believe it was becoming an important factor.

[165] * * * Q. Now, you have already covered for

me Sylvania’s policy against chain franchising. Now,

in 1965, it is a fact, is it not, that Continental T.V.

opened additional branch stores? You’re aware of

that? A. Yes. | :

Q. In fact, they opened a store in Oakland, did

they not? A. Yes. 7 |

Q. They opened a larger and more spacious store

in San Jose, a warehouse in San Jose, didn’t they?

A. Yes. |

Q. They opened a store in Salinas? A. Yes.

Q. They even opened a store in Seaside, Califor-

nia? A. Yes.

Q. They opened the store up that .sed to be the

rain store—they reopened 177 West Santa Clara

Street in San Jose? A. Yes. :

Q. You were certainly aware of all these openings,

were you not? [166] A. Yes.

Q. "Let's take the Oakland store first. That was

opened in about March of 1965? A. I believe so.

. All right, sir. | | .

> a since Sylvania does not franchise chains, it

was necessary for Mr. Shahood on behalf of Continen-

tal T.V. to seek Sylvania approval for that location

before he could merchandise Sylvania from it, right ?

A. Yes, sir. :

Q. And since that location in Oakland was not

within your territory, you weren’t authorized to fran-

chise it for him, were you? A. That’s right.

Q. So he would have to talk to either Mr. Hallday

whose area it was or to Mr. Carroll who supervised

the territories in general, correct? A. Right.

Q@. And as a matter of fact, after you learned

about the location proposed by Continental in Oak-

land, did you discuss it with Mr. Carroll? A. Yes,

sir.

Q. And did Mr. Carroll have any concern with the

location of other Sylvania dealers around the area?

A. He didn’t express any to me.

[167] Q. He only wanted to know one thing, and

that was, where was that store going to be located ?

A. Yes, sir.

Q. He didn’t ask you about anything else, did he?

A. No.

Q. And you told Mr. Shahood after talking to Mr.

Carroll—strike that. Mr. Carroll didn’t have any ob-

jection either, did he? A. He didn’t express any

objection.

Q. Do you understand, or did you understand at

that time that Mr. Carroll had approved that loca-

tion for Continental in Oakland? A. That was my

understanding.

* * *

[170] * * * Q. All right. Mr. French, we have

talked for about a day now about franchisers. What

did it mean to the dealer after you told him that he

was franchised as a Sylvania dealer? What did that

mean to him? A. That he was franchised as a Syl-

vania dealer. It meant basically that he could sell

Sylvania products from that location.

[171] * * * Q. I will withdraw the question. Is it

not a fact, Mr. French, that other than entitling the

dealer to sell your product from that .ocation, the

franchise doesn’t mean one other thing to him? A.

As far as I know.

Q. As far as you know, that is correct, is it not?

A. That is correct.

cis2] ** * Q. All right, sir. Let me put it this

way: In 1964 did your company grant exclusive fran-

chises as a policy? A. No sir.

Q. And they did not in 1965 either, did they? A.

Not to my knowledge.

Q. And to your knowledge that was their policy

in your territory, in Mr. Hines’ territory, Mr. Hall-

day’s territory, as far as you know and all the rest of

the territories? A. As far as I know there was no

policy against—for or against exclusive franchises. I

know of no policy.

Q. It was not a policy of your company to grai '

them? A. Yes. No, I don’t know. There is no pol-

icy as far as exclusive franchising.

Q. You say there was no policy. Do you mean

there was no policy one way or the other; that some-

times you granted them and sometimes you did not?

A. T don’t know of any policies that were granted.

I don’t know of anyone that was refused one. I don’t

know of any such instances.

Q. Let’s talk about that a minute, Mr. French.

Since January of 1963 did you ever tell a dealer he

had an exclusive franchise in any given territory ?

[183] A. No sir.

Q. To your knowledge has Mr. Hines ever told

anyone that he had an exclusive franchise in his

territory? A. Not to my knowledge.

Q. Has Mr. Hallday ever told that to any dealer,

to your knowledge? A. Not to my knowledge.

Q. And has Mr. Carroll ever granted, as your im-

mediate superior, an exclusive franchise to any dealer

in any territory that you knew about? A. Not that

I know of.

Q. What do you mean by an exclusive franchise

as we have been using the term? A. As an exclu-

sive franchise I am guessing it would be that there

would be no other dealer ever solicited in that area,

that you have an exclusive franchise to sell a prod-

uct.

Q. In other words, that you would promise that

dealer not to put on another dealer in that territory,

would that be correct as a definition of exclusive

franchise? A. As a broad statement I would say

yes.

Q. That is what we are talking about, is it not?

A. Yes.

* + *

[236] * * * Q. Now, did you solicit further or-

ders from Continental T.V. after that last telephone

conversation? <A. Yes, sir.

Q. As a matter of fact, you were having—I say

you—[237] Sylvania was having a local San Fran-

cisco show of their 1966 line about that time? A.

Yes.

Q. What was the purpose of the local show? A.

To introduce the new line of merchandise to the local

dealers that were unable to attend the Chicago con-

vention.

Q. The dealers were not invited to the Chicago

convention? A. Yes.

Q. And at or near the time of that show, you solic-

ited a $50,000 order from Mr. Shahood by phone?

A. I believe it was in that neighborhood.

Q. And later you contended to review that same

order with him in San Jose? A. Yes.

Q. And it was finally raised to about $63,000,

$64,000, correct? A. I believe so.

Q. All right, sir. Let me show you Exhibit P and

ask you if you recognize that document. A. Yes.

Q. Now, at or near the time—strike that.

This Exhibit P is what, sir? Is ti ¢t the July

order [238] that Mr. Shahood gave you on behalf of

Continental? A. Yes, sir. It is dated July 20, I be-

lieve.

Q. And that’s a dollar amount shown on it, is it

not, $63,658.91? A. Yes.

Q. Is that the order you solicited and finally got

from Continental T.V. in late June or early July?

A. Yes, sir.

Mr. Miller: We would offer this as Claimant’s

next.

Mr. Popofsky: No objection.

The Court: Admitted.

The Clerk: Claimant’s P admitted in evidence.

[Document above referred to was marked

Claimant’s Exhibit P for identification. ]

[242] Did you solicit any orders after the July

order? A. I believe I did, yes.

Q. I show you a document marked as Exhibit R.

Please read that over to yourself. A. Yes, sir.

Q. What is the date on that order? A. August

27.

Q. And that was really written up in the form

of two orders, was it not? A. Yes.

Q. And one order was for immediate shipment?

A. Yes.

Q. And one was to be shipped after October, Oc-

tober 10th? A. Yes.

Q. Did you take this order? A. Yes, sir.

Q. Mr. Shahood signed this as you did the pre-

vious July order? A. Yes, sir.

Mr. Miller: I offer this, Your Honor, as Claim-

ant’s next in order.

Mr. Popofsky: No objection.

The Court: Admitted.

The Clerk: Exhibit R introduced and admitted in

[243] evidence.

[Shipment orders, marked Claimant’s Exhibit

R for identification was received in evi-

dence. |

Mr. Miller: Q. All right.

So this Exhibit R, this August 27 order, was for

about $112,000, merchandise to be split-shipped, cor-

rect? A. Yes.

Q. So we had a July 3rd order for $63,000 and

now we have the August 27th order for $112,000 to be

split-shipped or about $175,500 worth of Sylvania

merchandise which Continental ordered after the

June convention, correct? A. Yes, sir.

Q. All right.

Now, did—the July order, Exhibit P, was that

routinely processed? A. To the best of my knowl-

edge.

Q. To the best of your personal knowledge? A.

Yes.

Q. And did you send it to Mr. Lopolito of the—

the credit man in Los Angeles? A. I believe I did.

Q. And to your knowledge was it processed rou-

tinely there and sent on for filling at the factory? A.

I believe so.

[248] * * * Q. Now, Mr. French, when did you

first become aware that Continental was proposing a

Sacramento location? A. It had been mentioned—

T am not exactly sure when.

Q. All right, sir.

I refer you to page 406 of your deposition, start-

ing [249] at line 15.

“Q. Now, Mr. French, when did Mr. Shahood

first tell you that he planned to open a Sacra-

mento store?

“A. That was before we went back to Chicago.

“Q. Would it be before June?

ad)

“A. It was before June.

“Q. Can you recall from the month when you

were first told that he planned to open a Sacra-

mento store?

“A. I believe it was in—I can’t say for sure—

sometime in March, I believe, somewhere in that

area.”

Mr. Miller: Q. Would that refresh you, sir, to

some extent as to when you first learned of it; some-

time in March or spring of 1965? A. Yes.

Q. When did you first hear about a proposed

Sacramento location for Continental T.V.?

Did Mr. Shahood tell you that he was proposing to

sell Sylvania products there? <A. No, sir.

Q. What products did he talk about handling at

that time? A. Philco, primarily.

[250] Q. Also Motorola? A. Motorola.

Q. What did you do with this information in

March of 1965? A. I believe I informed Mr. Car-

roll.

Q. That’s right.

You relayed this information to Mr. Carroll,

regional sales manager, pretty much immediately,

didn’t vou? <A. TI believe so.

Q. Okay. And as a matter of fact, didn’t you tell

Mr. Shahood on that occasion that that was all well

and good in substance, but that if lie had planned

to sell Sylvania in Sacramento that he certainly could

not do so without the permission of Mr. Hines?

A. I don’t know whether Sylvania was even brought

up at that time.

Q. That certainly was the fact ‘of the Situation,

was it not, that if Continental did intend to sell

Sylvania merchandise in Sacramento that Mr. Hines,

the district sales manager for that territory, would

have to be contacted and approved? <A. Yes, sir, I

believe that’s right.

Q. Now, didn’t you in fact tell Mr. Hines, the

Sacramento c2!esman—when you were at the Chicago

convention that Continental might possibly open a

Sacramento store? [251] A. I believe I mentioned

it to him at the convention.

Q. What did Mr. Hines respond to you? A. I

don’t remember any response at that time.

Q. Didn’t he say in substance he didn’t know what

could be done about it? A. I don’t remember what

his response was. I don’t remember, really.

Q. I refer you to page 410 of your deposition,

commencing at line 1.

“Q. Do you remember any discussion between

the people I mentioned concerning Sacramento

at all at any time at the Chicago convention ?

‘‘A. Not in any group meeting such as that.

I don’t remember any meeting at that time. I

talked to Mr. Hines and said that there was a

possibility that George Shahood might approach

him on the possibility of a franchise for Sylvania

in Sacramento.

“Q. And what did Mr. Hines say to that?

“A. T don’t remember his exact words, some-

thing about how it could be worked out at the

present time, or he didn’t know what could be

done about it.

“Q. Did he tell you why?

“A. I don’t believe that he mentioned any-

thing as to why. He handles his territory the

same as I [252] handle mine; to the best of his

ability and where he can get the best terms on

the merchandise and exposure in his territory.”

Mr. Miller: Q. Now, these questions, of course,

were asked and you gave these responses under oath.

Does that help refresh your recollection? A. Yes,

I believe so.

Q. As far as you knew Hines followed the elbow

room policy in his territory as you did in yours?

A. Hines handles his territory the way—as I handled

mine, I believe.

Q. All right sir.

* . .

[255] ***,Q. All right.

Now, Mr. French, in 1964 or 1965, did you have

any dealers in your territory that in the usual course

of business sold products in Sacramento? A. No,

sir.

Q. Do you know of any dealer in San Francisco

—strike that—in Mr. Hallday’s territory in either of

those years that in their normal course of business

had a store in San Francisco but sold television sets

to people in Sacramento? A. Not to my knowledge.

Q. Would your answer be the same for Oakland

and Salinas? A. Yes, sir.

Q. Isn’t it a fact, sir, that it is just economically

not practical for a dealer to try to sell to people, let’s

say, over a distance of 50 or 75 miles away from his

store [256] and also service the sets and do the other

things that are necessary? A. It is not economically

feasible, but some dealers do it.

Q. To your knowledge Continental T.V. never at-

tempted to do anything like that, did they? A. Yes,

sir.

Q. How far would you say Continental T.V. at-

tempted to serve its customers in volume from

there—— A. In volume. Now, you see, you stated

two different questions.

Q. What I am asking is simply this, Mr. French.

You were pretty much personally aware of the

volume of sale that Continental had in 1965, weren’t

you? A. Yes.

Q. You knew that they were selling several hun-

dred sets a month? A. Yes, sir.

Q. What I am saying is that it is a fact, is it not,

that Continental T.V. could not do that «ind of

volum. in Sacramento from a location in San Jose?

A. Would you state the question again, please.

Q. I am simply asking you is it not economically

impossible or impractical, based upon your knowl-

edge of this industry, for a dealer located in San

Jose to sell [257] at a volume of several hundred

sets a month to customers located in Sacramento?

A. I would say that it is impractical, yes.

Q. Would your answer be the same if I asked you

about a dealer located in San Francisco selling to a

Sacramento audience? A. Yes, sir.

Q. Would it be the same if I asked you about an

Oakland location? A. Yes, sir.

Q. Or a Salinas location? A. Yes, sir.

Q. Now, getting into August of 1965, of course, .

you received this large order, Exhibit R, for $112,000.

Were you calling on Continental stores frequently?

A. I believe I was.

Q. And did Mr. Shahood during the month of

August again mention to you the fact that he was

going to open a store in Sacramento? A. I believe

he did.

Q. In fact, he told you that it would be open about

the first week in September, didn’t he? A. I believe

SO.

Q. Didn’t he also teli you that he was planning

a store in Vallejo? [258] A. Yes, sir.

Q. About the same time? A. Yes.

Q. He told you he had a lease for it and it would

be soon open? A. Right.

Q. And he was planning to open the Vallejo store

after the Sacramento opening, was he? A. I believe

that was his plans.

Q. Now, as of August of 1965, had you told Mr.

Shahood that he could not display and sell Sylvania

sets in Sacramento without clearing the franchise

with Hines? A. I don’t know whether I did or not.

Q. Yor ould have? A. I could have.

Q. Tha. was the fact, of course, wasn’t it? A.

That’s not my territory. I have no jurisdiction.

Q. Id like to refer to page 444 of the deposition

of Mr. French, line 2.

“Q. On this occasion did Mr. Shahood tell

you he planned to open a Sacramento store

around September 1st?

“A. That he planned to open a Sacramento

store—

“Q. Around September Ist.

“A. Around September Ist, right.

[259] “Q. And he also told you that he had

planned to have the Vallejo store opened soon

thereafter, did he not?

“A. Right.

“Q. Now, previous to this date you had told

Mr. Shahood, had you not, Mr. French, that he

could not move Sylvania products into Sacra-

mento?

‘““A. Thad told Mr. Shahood that I have no

control over the Sacramento area territory. And

if he ever planned to use Sylvania in Sacramento,

the franchise would have to be negotiated with

Mr. Hines. As far as I can remember he was not

still planning to use Sylvania merchandise in

Sacramento.”

Mr. Miller: Q. So, does this help refresh your

recollection that you probably did tell Mr. Shahood

previous to this August date? A. Yes.

* * .

[263] * * * Q. Okay. Now, you weren’t aware of

any credit problems of Continental as of late August,

were you? A. No, sir, I don’t believe so.

Q. You got the order here, Exhibit R and had

that approved and Mr. Popolito was contacted ?

A. Yes.

Q. Everything was working pretty normally ?

A. Yes.

Q. As of August 27? A. I believe so.

Q. Mr. Steiner, when he was contacted about ap-

proving the mix of 25 H color sets on the August

order, hadn’t indicated any kind of payment prob-

lems? A. No, sir.

Q. Credit problems? A. No.

Q. Would this situation be the same if I asked

you as of the first week in September? A. I believe

so.

Q. You weren’t aware, at least of your own knowl-

edge, you weren’t, of any problem with Continental,

were you? [264] A. I don’t believe so.

Q. You had not received any notification from

Maguire about any unhappiness with Continental,

had you? A. No, sir.

Q. You hadn’t received any information from your

own credit department about any unhappiness with

Continental as of the first week in September, had

you? A. No.

Q. Okay. Now, Mr. French, when were you first

aware that Continental was actually in Sacramento

at 1870 Fulton Avenue with Sylvania merchandise

on the floor? A. I believe it was when Mr. Shahood

called me.

Q. Do you recall the date? A. I don’t, no.

Q. Early September? A. TI believe it was the

first part of September.

Q. All right. And what in essence did Mr. Shahood

tell you at that time? A. I believe that he said that

he had shipped some merchandise into Sacramento

and was awaiting a clearance of a franchise, or some-

thing to that effect.

Q. That’s right, Mr. Shahood called you, said “I

have got my store open in Sacramento and I have

shipped, as is our custom, merchandise for floor dis-

play and requesting franchise approval”? [265] Mr.

Popoisky: Your Honor, he asked that question, with

a precise answer and now there is a complete recapitu-

lation by counsel. I object to it.

The Court: I think you did put quite a few

condtions on, Counsel.

Mr. Miller: Very well, Your Honor. Let me with-

draw it.

Q. I want to be sure the record is clear as to what

you said, Mr. French. So you’re saying Mr. Shahood

on this occasion requested franchise approval for

Sacramento? A. I believe so.

Q. Did he mention Vallejo? A. I am not sure

whether that was mentioned then at that time or not.

It was mentioned, I believe, before then. I am not

sure whether it was restated then.

Q. All right. Up until this time have you ever

known of any other dealer in your territory that had

requested a franchise for Sacramento? A. Not to

my knowledge.

Q. Up until that time had you ever known a

dealer in Mr. Hallday’s territory, San Francisco, that

had ever requested a Sacramento location? A. I

couldn’t be.sure. I don’t know.

Q. What did you tell Mr. Shahood in response to

[266] learning for the first time that Sylvania mer-

chandise was in fact at 1870 Fulton Avenue in Sac-

ramento? A. I told him that that would have to

be a franchise, or negotiated with Mr. Hines, I believe,

in Sacramento. I believe that’s it.

Q. Let’s back up a minute. Did you tell him you

would have to be approved at that location by: Syl-

vania, in substance? A. I don’t believe so. I believe

I said that—I’m not sure, whether it was negotiated

with Mr. Hines or approved franchise. I had no juris-

diction over that, that’s all I know.

Q. Okay, and that’s what you said in substance

to him, is that right? A. Yes.

Q. You had no jurisdiction in Sacramento? A.

Yes, sir. |

Q. And you told him he would have to get the

franchise approval from Mr. Hines? A. Yes, sir.

Q. Okay. Didn’t you also tell him that if he re-

mained in Sacramento with Sylvania merchandise

against your company’s wishes that he would jeopar-

dize the orders that he had already placed with his

company? A. That he would jeopardize his rela-

tionship with me.

Q. Did you tell him on that occasion that he would

[267] jeopardize the fulfillment of the orders previ-

ously placed and accepted? A. I don’t believe so.

Q. Did you tell him that if he maintained sets in

Sacramento against Sylvania’s wishes he would pos-

sibly jeopardize the entire relationship which would

be a very poor thing to do because of the scarcity of

color sets? A. I may have said something to that

effect, yes, sir.

Q. What did Mr. Shahood respond when you ex-

pressed—-explained these things to him? A. He said

if he couldn’t get a franchise in there that he would

bring the sets back.

Q. Guess he would have to bring them back?

A. That he woul? bring them back.

Q. All right. He told you that? A. He told me

that he would bring them back.

Q. Okay. And is that about the entire substance

of that first telephone conversation? A. I believe

so.

Q. Did you ever tell Mr. Shahood if he intended

to stay in Sacramento against the wishes of Sylvania

that he should wait until he received all the previous

orders that he had made? A. I don’t remember it.

Q. I would like to refer you to Page 445 of Mr.

[268] French’s deposition, commencing at Line 4.

“Q. Didn’t you tell Mr. Shahood previous to

this August 16 meeting that if he had to display

and sell Sylvania products in Sacramento to at

least wait until his previous orders had been

shipped and delivered before he made any move

in that direction ?

“A, I——”

Mr. Miller: If Your Honor please, I am going

to read the answer the way it was originally given

under oath and transcribed and then I will read the

answer the way it has been corrected by the witness.

The Court: Very well.

Mr. Miller: The original answer as transcribed

under oath:

“T told Mr. Shahood that he should wait until

any orders were placed and shipped before he

even made any request for Sylvania franchise

in Sacramento, if he so desired.”

Q. Now, you were given an opportunity to correct

this deposition some weeks after you were deposed,

Mr. French, you remember that? A. Yes, sir.

Q. This is one of the passages that you corrected.

I will read the correction next.

“A. There was no reason for such a statement

at [269] this time. No franchise had been re

quested for Sacramento and all orders were being

shipped.”

Now, sir, then between the time of your first answer

and the time you corrected that passage did you talk

to counsel? A. No, sir, I don’t believe so.

Q. Did you talk—— A. I believe in reading the

deposition that the formation of chain of events made

it unnecessary to make that answer.

Q. All right. A. And it just didn’t fit into the

sequence of operational questions, to the best of my

knowledge.

Q. The first answer I read to you, Mr. French, is

the answer you did in fact give under oath in the

deposition, isn’t that right? A. I believe that it is.

[270] Q. Do you remember when you told Mr.

Shahood that he should consider whether or not he

was jeopardizing his entire relationship over the Sac-

ramento issue? A. Yes, I believe I remember.

Q. What you meant by that was that he should

assure himself that Mr. Hines was going to give him

approval because you did not have the authority to

make that approval yourself? A. I had no juris-

diction.

Q. That is right, but isn’t that what you told Mr.

Shahood? A. I told Mr. Shahood that I did not

have any jurisdiction in Sacramento.

Q. And that if he went ahead without getting

Mr. Hines’ approval he might consider jeopardizing

the entire relationship, correct? A. With me.

Q. What did you do after talking to Mr. Shahood

and learning that the merchandise was in Sacra-

mento? A. I believe I called Mr. Steiner on that

day.

Q. That’s right. But before that you called Mr.

Hines, didn’t you? A. I don’t believe so.

Q. Pardon? A. No, sir. Again, what day is it

that I am ialking about here?

[271] Q. I am talking about the next thing you

did after you talked to Mr. Shahood and found out

that sets were up there in Sacramento? A. What

day was it that Mr. Shahood called me?

Q. You placed it on September 3 in your deposi-

tion. A. Which is on what day?

Q. That would be a Friday. A. A Friday. Then

I called Mr. Steiner before I called Mr. Hines.

Q. I refer you to Page 481 of your deposition,

starting at Page 7:

“Q. Was there any further conversation con-

cerning this matter that you recall that you had

with Mr. Shahood on this occasion?

“A. Not that I recall.

“Q. Now, two days later on a Sunday, Sep-

tember, 1965, you phoned Mr. Hines in Sacra-

mento to discuss this thing, didn’t you?

“A. I phoned Mr. Hines and said that there

was merchandise in, that George had moved some

merchandise in Sacramento.

“Q. That was on Sunday, September 5?

“A. Right.”

Does that refresh your recollection? A. I knew

I called Mr. Hines on Sunday. If I called [272] some-

body else before—immediately afterwards was the

question you put to me, immediately afterwards. I

talked to Mr. Shahood, I called somebody, I couldn’t

have called Hines immediately after. One was on

Friday and one was on Sunday.

Q. Do you recall calling anyone else between the

time you talked to Mr. Shahood on Friday and the

time you called Mr. Hines on Sunday? A. I am not

sure if I called Mr. Steiner now or not.

Q. Okay. Let me move on to Sunday’s conversa-

tion. You called Mr. Hines. You—he is your counter-

part in Sacramento? A. Yes, sir.

Q. And you for the first time told Mr. Hines that

Continental had Sylvania merchandise in his territory,

correct? <A. I believe that was the first time, yes.

Q. Did Mr. Hines give any indication that he had

known of this before your call? ‘A. No. sir.

Q. Did you tell Mr. Hines that Continental T.V.

was requesting a franchise for the Sacramento loca-

tion? A. Yes, sir.

Q. And did vou mention also that—Vallejo? A.

I believe that I did, I am not sure.

[273] Q. All right. And Mr. Hines responded in

what manner? A. I believe that he said he didn’t

know what could be worked out at that time due to

the commitments that Handy-Andy had made to him.

Q. Said he didn’t know what could be worked out

because of commitments which Handy-Andy had

given him? A. Or with—yes, I believe so.

Q. Did he not say because of commitments which

he had given Handy-Andy? A. No, sir.

Q. Did he mention Keith Anderson’s name in that

conversation? A. I couldn’t be sure whether it was

Keith Anderson or Handy-Andy.

Q. Keith Anderson is the owner of Handy-Andy,

right? <A. Yes, sir.

Q. You knew that at that time? A. Yes, sir.

Q. You also knew that he was the major Sylvania

dealer in Sacramento? <A. Yes, sir.

Q. Did Mr. Hines in this telephone conversation

on Sunday offer to work out any meeting between

the dealers or any other kind of accommodation?

[274] A. I don’t believe so.

Q. Didn’t talk about it? A. I don’t remember

any conversation.

Q. Now, you recall any other thing about that

Hines conversation on Sunday? A. No, sir.

Q. Okay. Now, do you recall that it was after

talking to Hines on Sunday that you talked to Mr.

Steiner in Batavia? A. It is very possible. I don’t

know the sequence of those calls.

Q. So on Friday, try to straighten the sequence

out for you, on Friday you talked to Mr. Shahood?

A. Evidently it was in the late afternoon that Mr.

Shahood called me.

Q. On Sunday you talked to Mr. Hines in Sacra-

mento? A. Yes.

Q. Correct? A. Yes, sir.

Q. Monday was a holiday, Labor Day, correct?

Remember that? A. If you say so. I don’t re-

member.

Q. If you don't, tell me. All right. ee then,

was the first day—

Mr. Popofsky: Stipulate that Monday was a holi-

day.

[275] Mr. Miller: Thank you.

Q. Tuesday was the first work day in that week.

Will that help you to refresh your recollection in

this period? A. Yes, I think so.

Q. All right. And do you recall that on that first

work day the 7th of September, you placed a call to

Batavia? <A. Yes.

Q. You talked to Mr. Steiner, the national sales

manager, correct? <A. Yes, sir.

Q. You told Mr. Steiner that Continental had

moved sets into Sacramento and was requesting a

franchise for Sacramento and Vallejo, did you not?

A. I believe so.

Q. Did you tell him that you had just talked to

Hines two or three days previous? A. TI think f did.

Q. Did you tell him what Hines had indicated to

you? A. TI believe so.

Q. What did Mr. Steiner say? A. Something

like he'll get back to me, or something like that. T

don’t believe I got any direct answer at that time.

Q. He said in substance, did he not, “I will check

into this and get back to you”? [276] A. I believe

that he did.

Q. Okay. And did you hear from Mr. Steiner

again the same day? A. I believe so.

Q. Still September 7. A. I believe so.

Q. About how long after your first call, any recol-

lection? A. I don’t remember.

Q. A couple of hours? A. Probably two to three

hours, I couldn’t say.

Q. What did Mr. Steiner, what did he tell you,

what did Mr. Steiner tell you when he called back?

A. I believe he said that it couldn’t be worked out

at that time for Sacramento, that there was a pos-

sibiuity of Vallejo and what was Mr. Shahood going

to do with the merchandise that he had in Sacramento,

if I recall.

Q. All right. Did Mr. Steiner in fact tell you that

it was impossible to franchise Sacramento for Conti-

nental at that time? A. I believe so. I don’t know.

Mr. Popofsky: If Your Honor please, he just gave

a precise answer in his own words and now he is

restating it. This is cross-examination, but that isn’t

testifying through the witness.

[277] Mr. Miller: Your Honor, I am trying to

make this as precise as I can because it is rather

crucial.

The Court: Said it could not be worked out, was

the phrase he used.

Mr. Miller: I am trying to point out to the wit-

ness what Mr. Steiner actually said, was that it was

impossible. I suppose you can use them as synonyms,

but they may have some stronger meaning one way

or the other.

The Court: Is that the word in the deposition?

Mr. Miller: Yes, sir.

The Court: You might read it.

Mr. Miller: Let me do that, commencing at Page

485, Line 5:

‘“@. Did Mr. Steiner say anything before he

said he would phone you back ?”’

This is the previous call.

‘‘A. No, he said he would get back to me on it.

‘*Q. How long a period elapsed between that

phone call and Mr. Steiner returning the call?

‘“‘A, I don’t remember; a couple of hours, pos-

sibly.

‘‘Q. Do you have any information as to who

Mr. Steiner talked to in that interval?

“A. No, I do not.

‘“Q. But Mr. Steiner did call back the same

day, I take it?

[278] ‘‘A. Yes, I believe so.

‘*Q. And what did he say?

‘‘A. He said that it was impossible at the

present time to grant a franchise for Sacramento,

that they would like to negotiate with George for

a Vallejo franchise.

““Q. Did they say why it was impossible?

““A. No.

‘‘Q. Did he say anything else?

**Q. What did you say?

““A. Nothing, that I know of. I can’t recall

anything.”

Now, does that help refresh your memory, sir, as to

what term or terms Mr. Steiner used when he spoke

of the franchise situation in Sacramento? A. He

could have said impossible, yes. Or I could have used

the word myself.

Q. Now, as a matter of fact, you haven’t known

until this day who Mr. Steiner may have talked to in

that interval? A. No, sir.

[Continued on next page; nothing omitted. ]

[279] Q. Okay. Now, what did you do after you

talked to Mr. Steiner a second time and found out

that it was impossible to franchise Continental in

Sacramento? A. I called George back, I believe.

Q. Okay. And you in substance told him exactly

what Mr. Steiner had told you? A. Yes.

Q. And you told him further that this had come

from Mr. Steiner? A. That’s what had come from

Mr. Steiner.

Q. Let me back up.

You talked to Mr. Shahood after the second Steiner

call. You told Mr. Shahood that Mr. Steiner had told

you that it was impossible to franchise Continental in

Sacramento, isn’t that right? A. If those are the

words I used, yes.

Q. In—my only point was that you told Mr.

Shahood on that occasion that that decision had been

made by Mr. Steiner? A. Yes.

Q. Now, Mr. Shahood responded that in the in-

terim he had talked to his attorneys, isn’t that right?

A. Yes.

Q. And that he had been advised that Sylvania

could not dictate to Continental respecting the loca-

tions where [280] they could sell merchandise? A.

I expressed his feelings on that, yes.

Q. And he told you also that Continental was going

to sell merchandise in Sacramento and specifically was

going to sell Sylvania merchandise, correct? A. I

believe he did.

Q. And this still was on the same day, was it not,

September 7th? A. Yes.

Q. Did you tell him the part about the possibility

of being granted a Vallejo franchise? A. I think I

did.

Q. Okay.

Now, what did you do after learning from Mr.

Shahood that Continental T.V. was going to break

away from this pre-approval of franchise locations?

Did you talk to anyone else in your company? A. I

don’t believe so at that time.

Q. Don’t you recall, sir, that you again called Mr.

Steiner, your third conversation with him on the 7th?

A. I may have. I thought you said someone else.

Q. I am sorry.

You again talked to Mr. Steiner, do you <all,

phoned him back? A. Yes.

[281] Q. And in substance what did you tell Mr.

Steiner? A. Mr. Shahood had the merchandise in

Sacramento and would not fulfill his promise to me to

bring the merchandise back.

Q. And you also told him that Continental had

received legal advice, didn’t you? A. Yes, sir.

Q. Okay. Mr. Steiner in substance told you in

response to that that you would have no further con-

tact with Continental T.V. or Mr. Shahood, did he

not? A. I am not sure.

Q. I would like to refer to Page 491 Line 10.

**Q. Now, in the same telephone conversation

Mr. Steiner told you also, Mr. French, did he not,

to have no further contacts with Continental rep-

resentatives and to have your phone alls

sereened ?

“A. Yes.

“Q. He told you not to talk to any Continental

people, did he?

‘‘A. He told me not to have any contact with

Mr. Shahood specifically.”

Now, you made those responses, sir? A. I did, but

I am still not sure that it was Steiner or John Mor-

gan.

Q. You talked to John Morgan a few days later

after [282] the Steiner calls? A. That is true. I be-

lieve it was John Morgan that told me not to have

anything to do with it. Honestly, it is in the deposi-

tion as such, but I think by reading further in the

deposition that it clarifies itself. It did to me

Q. John Morgan, sir, was the vice-president in

charge of sales for your company? A. That is right,

sir.

Q. And that’s the gentleman you just referred to?

A. Yes, sir.

Q. And you in fact did have a telephone conver-

sation with Mr. Morgan some six days after these

telephone calls with Mr. Steiner, didn’t you? A. Yes,

I believe I did.

Q. You are telling me now that despite what you

said in your deposition you don’t know at this point

whether Mr. Morgan told you to screen your calls

and stay away or Mr. Steiner told you that, is that

right? A. That is right.

Q. Didn’t you learn about the same time from Mr.

Lopolito, the credit man, that his boss had given him

the same instructions about the same time to screen

his calls and to stay away? A. Whatever the time

was, yes.

Q. You learned that, didn’t you? [283] A. In the

same sequence, yes.

Q. Now, Mr. French, besides Continental T.V., do

you have any personal knowledge of any other dealer

in your territory who ever tried to sell merchandise

from a location that was not franchised? A. Not to

my knowledge, no.

Q. How about Robert E. Lee? A. Oh, yes.

Q. As a matter of fact, Mr. French, since you

have been in California from January 1963 to the

present time, there are only two dealers who ever

tried to display and sell merchandise from a non-

franchise location to your knowledge; isn’t that right ?

A. Yes, I believe so.

Q. And those two dealers are Continental T.V. and

Robert E. Lee; is that a fair statement? A. Yes,

sir.

Q. Iam going to talk to you about Robert E. Lee.

Was Robert E. Lee a franchise dealer when you got

to California in January of 1963? A. He was deal-

ing with Sylvania merchandise, yes.

Q. And he was one of the dealers that you fran-

chised initially, correct? A. Yes.

Q. What was his other store? [284] A. In Hay-

ward.

Q. That was his branch store, wasn’t it? A. Yes,

sir.

Q. And he had a main store also? <A. Yes.

Q. Where was that located? A. Berkeley.

Q. So in 1963 did you franchise both stores or just

one store? A. Just one store. :

Q. As a matter of fact, he wasn’t interested in a

Sylvania franchise for his Berkeley store in 1963,

was he? A. No, sir.

Q. He didn’t request it? A. No, sir.

Q. You didn’t offer it? A. No.

Q. So you franchised him in Hayward, correct?

A. Yes, sir.

Q. And you used the standard written franchise

form we see for Continental? A. Yes.

Q. And you made the same verbal representation

to him that he needed approval before he could sell

from any other store should he so desire in the

future? [285] A. Yes.

Q. Now, he became a pretty good volume dealer

for you in 1963, didn’t he? A. Pretty fair.

Q. Do you recall, was he purchasing in carloads

or half carloads at a time? A. I believe he had

purchased a couple half carloads orders.

Q. He was doing fifty, sixty thousand dollars a

year with you? A. Yes.

Q. Selling good color volume? A. Yes.

Q. All right.

Now, in June of 1964 Robert E. Lee made a deci-

sion to sell Sylvania merchandise from his Berkeley

main store and he moved merchandise to a location

without your permission isn’t that right? A. Yes.

Q. Now, Berkeley at that time was being covered

by Mr. Carroll, isn’t that correct? A. I believe so.

Q. It was probably just before Mr. Hallday started

with the company. So Mr. Carroll was covering that

territory? <A. Yes.

[285-A] Q. Mr. Carroll was opposed to the fran-

chise for Mr. Robert E. Lee in Berkeley was he not?

A. I believe he was.

[Continued on next page; nothing omitted.]

[286] Q. And his reason, was it not, was that a

dealer named Dale Sanford T.V. was his big—Car-

roll’s big—Berkeley dealer? A. Mr. Carroll never

gave me his reasons. I don’t believe so.

Q. Don’t you know of your own knowledge, sir,

that the reason for Sylvania’s displeasure that having

Mr. Robert E. Lee move sets to Berkeley was that

he was then in competition with Dale Sanford? A.

As far as I know Robert E. Lee only moved some

portable black and white merchandise into Berkeley.

As far as I know for rental to the college students.

Q. And competition with Dale Sanford hadn’t

anything to do with it? A. I am not saying that

competition may not have had anything to do with

it. I don’t know.

Q. You don’t know? A. There wasn’t enough

merchandise there that I know of.

Q. I would like to refer the Court and counsel to

page 101 commencing at line 22.

“Mr. Miller: Q. You were at the Robert E.

Lee store?

“A. IT was at the Robert E. Lee store calling

on Sal Talisford who was the manager at that

store.

[287] “Q. And that’s a large order for you?

“A, Yes. He did a darn good volume. Prob-

ably one of our better. He was probably mov-

ing as much color as any dealer that I had.

“Q. All right.

“Is that part of your Alameda County Dis-

trict?

“A, Yes.

“Q. And are they still with you?

“A. No, sir.

“Q. When did they terminate?

“A. When did they terminate ?

“They terminated in—let’s see now—we are in

March of 1964—I believe they were terminated

in June or July of that year.

“Q. All right.

“For what reason were they terminated ?

“A. The basic reason that I couldn’t—I didn’t

feel justified in calling on them and continuing

in business.

“Q. Was it because they could not or would

not furnish what you felt was a representative

display of the products?

“A, No, sir, it was not.

“Q. What was the reason, sir?

“A. The reason was because he was moving

[288] merchandise then to his store in Berkeley

that was not franchised.

“Q. Was that a Robert E. Lee store in Berke-

ley?

“A. Yes.

‘*Q. And Berkeley is not your territory, is it?

“A. It is not my territory and it was not—

was not in the best interest of Sylvania at that

time to handle Sylvania in that area.

“Q. Was that Mr. Hallday’s area?

“A. That was Mr. Hallday’s area.

“Q. Why was it not in the best interest of

Sylvania to handle products in Berkeley at that

time through Robert E. Lee?

“A. Because we had franchised the one store

for him. This was the store that he had a fran-

chise in. In moving the franchise into Berkeley,

he was in an area that one of our major dealers

was in that had made a fair commitment, and

with the volume of movements Mr. Hallday had

to have, he had to rely on that dealer, and it was

not in the best interest of Sylvania or my terri-

tory to let him move merchandise out of my ter-

ritory. I have control of my territory and can

franchise a dealer in my territory.

“Q. Well, was the major problem a loss of

merchandise from your area or was the major

problem of [289] having Robert E. Lee doing

business in Berkeley with Sylvania products?

“A. There was no major problem as far as the

loss for my territory was concerned.

“Q. What was the name of the other dealer

who Mr. Hallday was getting enough volume

through in Berkeley ?

“A. Dale Sanford.”

I would like to refer the Court and counsel to page

105 briefly at line 3.

“Q. Would you say that the reason the fran-

chise in Hayward was terminated for Robert F.

Lee was because he was taking Sylvania mer-

chandise and displaying it in Berkeley?”

Skipping to line 10:

“The Witness: Basically this is what it is.

T am making a living out of my territory and Jay

Hallday is trying to make a living in his terri-

tory. It is certainly not in the best interest of Jay

Hallday for me to let someone else send merchan-

dise into his territory, and I in turn would be

quite upset with Jay Hallday if he set up a couple

of three dealers up in my territory and started

shipping merchandise in to upset the dealer move-

ment and the dealer sales that I have generated

with my dealers. [290] It is respect as far as

salesmen are concerned. We have a responsibility

in our own district.”

Okay. Now, does that help refresh your recollec-

tion, Mr. French, that the reason Sylvania, as spe-

cifically you and Mr. Carroll, did not want a Robert

E. Lee merchandise in Berkeley was because he was

in competition in Berkeley with Dale Sanford?

A. My reason was the respect for the other salesmen.

Q. You gave these responses I just read under

oa‘), A. That is right and all of them to the re-

spect for the other salesmen.

Q. Is it your testimony now, sir, in Court that the

reason that Robert E. Lee was terminated was not

because he moved merchandise into Berkeley, but for

some other reason? A. The reason that he was ter-

minated as far as I am concerned is because there is

a verbal agreement that he is to get a franchise for

an area store that he goes into and he had not kept

that agreement with me.

Q. All right. So for that reason you terminated

him, correct? <A. Yes, sir.

Q. Basically what you are telling me, is it not, Mr.

French, that if you couldn’t control, for example,

Robert E. Lee as far as locations, you did not want

him as a dealer at all? [291] A. If I don’t have the

dealers integrity, why, it is pretty hard to do business

with him.

Q. And you won’t do business with a dealer, will

you, sir, unless you can control the location from

which——- A. Well——.

Q. Let me finish.

——you will not do business with a dealer and you

would not in 1964 and 1965 unless you as the district

sales manager could control the locations from which

that dealer displayed and sold Sylvania merchandise,

isn’t that true? A. If it is a matter of getting

agreement with the dealer, sir.

Q. And that was the problem with Robert FE. Lee,

was it not, in 1964? A. That our relationship had

been severed, yes.

Q. The reason was that you couldn’t control the

location from which he was doing—— A. He had

broken the agreement with me.

Q. And that agreement was that he would get your

permission before he sold from another location?

A. That is right.

Q. Okay.

Now, Mr. French, do you recall that some six days

after these telephone conversations with Mr. Steiner

that you were again in the Stevens Creek store, Conti-

nental Stevens [292] Creek store in San Jose? A. I

believe so.

Q. And you had gone there to discuss service prob-

lems? A. Yes, sir.

Q. And while you were there you had a conversa-

tion with Mr. Shahood, correct? A. Yes.

Q. Mr. Shahood asked you on that occasion to take

an order, a stock order for a Sacramento location, did

he not? <A. I believe so.

Q. What did you tell Mr. Shahood? A. I told

him that I had no right to take an order for my

location out of my territory.

Q. And that didn’t satisfy Mr. Shahood, did it?

A. No, sir. }

Q. As a matter of fact, Mr. Shahood sat down or

had his managers sit down at the typewriter and type

up a list of merchandise in lieu of an order form?

A. Yes, sir.

Q. Tet me show you Exhibit X, Mr. French. Look

it over and see if vou have seen it before. A. TI be-

lieve so.

Q. Isn’t that the order that Mr. Shahood typed up

or had prepared on his typewriter on the Alameda

letterhead of [293] Continental T.V.? A. It looks

like it.

Q. Dated September 13. You recognize that as Mr.

Shahood’s signature? A. Yes, sir.

Q. And you wouldn’t give Mr. Shahood an order

form for this, would you? A. No, sir.

Mr. Miller: We would offer this as our exhibit

next in order.

Mr. Popofsky: No objection.

The Court: Admitted.

The Clerk: Claimant’s Exhibit X introduced and

admitted in evidence.

(Claimant’s Exhibit X marked and received in

evidence. )

(Continued on next page.)

[294] Mr. Miller: Q. Now, you had occasion

while at the Continental store on the 13th of Septem-

ber to place a call to Mr. Lopolito’s offices in Los

Angeles, do you recall? <A. Yes.

Q. And you were talking to the warehouse people

down there about some parts? A. Service depart-

ment, yes, sir.

Q. Mr. Shahood requested that while vou were on

the line you should try to get ahold of Mr. Lopolito

for him? A. Yes, sir.

Q. Did he tell you why he was asking to place a

eall to Mr. Lopolito? <A. T believe he said that he

hadn’t been able to get through to him, or find him,

or something.

Q. He had been trying to contact him for some

time and Mr. Lopolito was always out to him? A. I

believe so.

Q. That’s what he told you anyway, correct?

A. He said he couldn’t contact him.

Q. And you did in fact get Mr. Lopolito on the

phone line, didn’t you? A. Yes.

Q. And then you gave the phone to Mr. Shahood

and they had some conversation in your presence, at

least you heard Mr. Shahood’s end of it? [295]

A. Yes.

Q. Mr. Shahood asked Mr. Lopolito on that occa-

sion whether there was any credit reason, any eredit

reason why the Sacramento order, Exhibit X, could

not be accepted and approved; isn’t that what you

heard? A. I believe that he did, yes.

Q. Of course, you didn’t hear Mr. Lopolito’s re-

sponse? A. No.

Q. Did Mr. Shahood tell you thereafter what the

* response had been? A. I think that he said——

* * *

[296] Mr. Miller: Q. What was indicated to you?

A. T believe Mr. Shahood told me that Mr. Lopolito

had told him that there was—he could see no problem

with it. I believe that this was his rernarks.

Q. Right. No credit problem. A. I don’t know

of there being any problem.

Q. And you had not been informed of any credit

problem up to this date, the 13th of September?

A. No, sir.

Q. So, with some inducement I am sure you were

given—you took the order, you took the order from

Mr. Shahood, Exhibit X. I mean, you physically took

it. A. With some inducement.

Q. You physically took it, correct, sir? A. Yes,

sir.

Q. What did you do after that? A. I mailed it

into—I called Batavia, I believe.

Q. You called Batavia. Who did you call for?

A. Steiner. Steiner wasn’t there, so I talked to John

Morgan, I guess.

Q. You finally got through to Mr. Morgan, the

vice president for sales of Sylvania’s sales corpora-

tion? A. Right.

Q. Where did you make this call from? Your

home? [297] A. No. I stopped at a phone booth

on the way home, because it was getting late I believe

for Batavia.

Q. It was your concern that Batavia know about

it that day? A. Yes, I believe so.

And it was getting late in the afternoon. Batavia

would be closed, so I did stop in at the phone booth.

Q. What did you tell Mr. Morgan when you got

him? A. That I had in my hand an order, or stock-

ing order for Sacramento.

Q. What was Mr. Morgan’s response to that state-

ment? A. Well, mail it to me.

Q. Didn’t he first tell you that you should not have

taken it? A. Yes.

Q. And didn’t he become angry on the phone?

A. Yes, I believe so.

Q. And didn’t he say in substance, “Why did you

take this order?” A. Yeah, why did I take it.

Q. Yes. What did you tell him? A. I told him

that it was a matter of taking it or Mr. Shahood was

going to send it extra special delivery.

Q. Then at that point, vice president Morgan told

you for you to stay away from Continental and to

have your [298] calls screened so that you would have

no chance to talk to him? A. I believe he did.

Q. That’s when it happened? A. Okay. All

right.

Q. And Mr. Morgan told you something else, isn’t

that so, after telling you to stay away and to have

your calls screened? A. I don’t remember.

Q. Didn’t Mr. Morgan on that occasion, sir, the

vice president, tell you that if Continental T.V. asks

about their previous orders that had not been shipped

to date to tell them that they were being held for

credit review? A. Yes.

Q. He made that statement? A. Yes.

Q. Mr. Morgan wasn’t in the credit office though,

was he, of your company? A. I con’t believe so. No.

Q. He was vice president in charge of sales, was

he not? A. Right. Yes, sir.

Q. Now, after the Morgan conversation on the 13th

of [299] September, did you talk to Carroll or Mr.

Steiner again about Sacramento? A. I believe so,

but I don’t know just when. I think Carroll and

Steiner were both out of town, or out of their offices.

That’s the reason why I talked to Mr. Morgan.

Q. Didn’t, in fact, Mr. Steiner return your call

either the same day or the next day after you talked

to Mr. Morgan? A. I can’t be sure about that.

Q. Id like to refer you to page 497 of your depo-

sition, line 1.

“Q. You say it was in this conversation that

Morgan may kave instructed you about what to

tell Shahood if he requested information about

his previous order?

“A. Either in this conversation or in the sub-

sequent conversation; that is, the same day or

other calls that Mr. Morgan was the only one in.

Mr. Carroll or Mr. Steiner were not in, and they

called me back on the phone again that afternoon,

I believe, or early the next morning.”

Mr. Miller: Q. You gave me that response, obvi-

ously, in your deposition. Do you recall anything

about what you and Mr. Steiner or Mr. Carroll dis-

cussed the day, the same day, [300] or the day after?

A. I don’t.

Q. About a week later Mr. Carroll is back in San

Francisco, correct? A. Yes.

Q. And you do meet with him in San Jose, I think

it is, and you discuss something about the Sacra-

mento situation, don’t you? A. I believe so.

Q. And, in fact, at that time weren’t you proposing

that somebody like Mr. Steiner or Mr. Morgan, or

even Mr. Theis, the president, come out to the coast

and sit down with Mr. Shahood? A. I certainly

hated to lose my volume.

Q. You were suggesting this to Mr. Carroll,

weren’t you? A. I believe so.

Q. You were looking for a resolution of this thing?

A. Yes.

Q. And what was Mr. Carroll’s response? A. I

believe that he said at that time that something to

the effect that you can’t negotiate with someone with

a gun at your head, or something like that.

Q. That’s correct.

He also told you, did he not, that the Sylvania

[301] sets that Continental had in Sacramento were

out of trust? Do you recall that? <A. I believe so.

Q. Mr. Carroll told you that? A. I believe so.

Q. Right. Now, Mr. Carroll wasn’t a credit man,

was he? A. No.

Q. He was a salesman? A. Right.

Q. And what did you understand the term “out of

trust” to mean? A. You are asking for my under-

standing about a trust?

Q. Yes. In the sales department—now, Mr. Carroll

used this term to you. A. In merchandise that is

on floor, trust set with a dealer that has moved from

the location that it is supposed to be in and supposed

to be paid before it is taken from the location.

Q. So you understood this to be some kind of a

violation of the financing terms with Maguire? A. I

assume it to be.

Q. That’s the way you understood it? [302]

A. That’s the way I assumed it tu be.

Q. That’s the way you understood Mr. Carroll used

it? A. Yes.

Q. Now, as a matter of fact, you even told George

Shahood the same thing, that these sets were out of

trust in Sacramento, didn’t you? A. As far as my

100

own personal opinion, I have no—I am not a financ-

ing man.

Q. I appreciate that. Do you recall making a

statement to Mr. Shahood? A. I believe that I did.

Q. Now, as part of your duties, sir, you fill out

certain reports, and one of those reports is a daily

call report? A. Yes.

Q. Do you still do that? A. No, sir.

Q. But in 1965, that was one of the requirements

of your job, correct? A. Yes, sir.

Q. And the day that you talked to John Morgan,

the vice president, and he told you that, “Tell them

there is a credit review if they ask,” and the day you

were at Continental and they gave you this exhibit X

order for [303] Sacramento, you prepared a call re-

port of your activity for the day, did you not?

A. Uh huh.

Q. Is that your signature on that document?

A. Yes, sir.

Q. And what is the date? A. September 13.

Q. Do you show a call to Continental T.V.?

A. Yes, sir.

Q. Does it show how many hours you spent there?

A. Yes.

Q. How many? A. About three hours.

Q. Does it show the person you contacted?

A. George Shahood; yes, sir.

Q. And then there is a section for comments, isn’t

there? <A. Yes, sir.

Q. And under the comment or the remarks section

at one place it says: “Still can’t get merchandise out

of Sacramento, but I feel it will be done shortly.”

101

Now, you printed that in the comments section, did

you, sir? A. Yes, sir.

Q. And that was the same day you talked to John

[304] Morgan on the phone? A. I believe so.

Mr. Miller: I would offer this as Claimant’s next

as offered.

Mr. Popofsky: No objection.

The Court: May be admitted.

The Clerk: Exhibit W introduced and admitted

into evidence.

(Claimant’s Exhibit W marked and received

into evidence. )

* * *

[310] * * * Q. Now, you attended a meeting the

evening of October 13, did you not? A. Yes.

Q. Where was that meeting held? A. At ‘the

Burlingame Hyatt House, I believe.

Q. Who was in attendance from your company?

A. Mr. Carroll, Mr. Lockhart, Mr. Lopolito, myself,

[311] I believe.

Q. How about Mr. Rivers? A. Mr. Rivers, I be-

lieve he was there, yes.

Q. Mr. Rivers was then the national credit man-

ager? A. I believe so. I don’t know exactly what

Tom’s title was.

Q. Who was present, to your recollection, from

Maguire Company? A. Mr. Pedlow and Mr. Pet-

rick. I believe those were the only ones.

Q. Now, Mr. Lockhart, the controller of Sylvania,

J. Lee Lockhart, made some introductory statements

at this meeting, did he not? A. I believe he did,

yes, sir

102

Q. Did he not say that, to those assembled,. that

they should remember this is a Maguire action and

not a Sylvania action? A. I’m not sure of his exact

words, something to that effect. .

Q. Well, he did that-—- <A. Sylvania, that Syl-

vania, that they were—they were there to identify

Sylvania merchandise, that—I’m not sure of his exact

words.

Q. All right, sir, but in substance he did tell those

assembled that the merchandise was picked up be-

cause of lack [312] of payment, didn’t he? A. I be-

lieve that was what he said.

Q. Then Mr. Pedlow took over the meeting, didn’t

he? <A. I believe so.

Q. Mr. Pedlow was a vice-president in charge of

flooring for Maguire Company, was he not, at that

time? A. I don’t know what his title was.

Q. But he worked for Maguire? A. Yes, my un-

derstanding.

Q. Okay. And he more or less reviewed the day’s

activities as an introduction, didn’t he? A. I be-

lieve so.

Q. Okay. And didn’t he cover the fact that the

Federal Marshals were instructed that they were to

treat Continental T.V. during this repossession as an

ex-con operation? <A. I believe that it was referred

to as Mr. Shahood was referred to as an ex-con.

Q. And he was to be treated as such? A. To

watch out for him or treat him under those condi-

tions, or something such as that. |

Q. You understood this to be on the instructions

that were given by Sylvania and Maguire to the

103

Federal Marshals? A. By Mr. Pedlow, as far as I

know.

[313] Q. Yes, to the Federal Marshals? A.

That’s as I understood, yes.

Q. And then didn’t Mr. Pedlow cover the fact that

the Federal Marshals patrolled all the store locations

so that the repossession did proceed simultaneously

from all stores? A. I believe so, yes.

Q. Did he mention why this was done? A. I

don’t know that he gave a reason for it.

Q. Mr. Pedlow also reviewed the fact that the

main Continental T.V. bank accounts were simul-

taneously attached? A. He may have. There was

some reference to the bank.

Q. All right.

And then as I understand it each of the various

men at the meeting reviewed for Mr. Pedlow and Mr.

Lockhart what occurred at their various locations

as they helped with the repossession, correct?

A. Yes.

Q. And generally speaking what did these people

say about the cooperation or lack of cooperation of

Continental people? A. They seemed to have pretty

fair cooperation in locating the merchandise.

Q. Did Mr. Pedlow, the Maguire man, agree?

[314] A. No, he said he had a little difficulty at

the Santa Clara Store.

Q. And in substance didn’t Mr. Pedlow say that

some day somebody is going to get that little Dago

down at the Continental main store? A. In sub-

stance I believe there was something mentioned about

that.

104

Q. Did he use that term? A. He was being ob-

structed a little bit, I believe.

Q. Did he refer to the store manager at Stevens

Creek in that phrase? <A. I believe that that was

the reference.

Q. That was Mr. Tony Greco? <A. Yes.

Q. Of course, you had known Mr. Greco a couple

of years by that time? A. Yes.

Q. Did you find him to be a cooperative person?

A. He had always been with me.

Q. Now, they also discussed at this meeting, did

they not, that Mr. Lockhart, the controller from Syl-

vania, was floundering around on Mr. Shahood’s false

ceiling over his office? A. Yes.

Q. And came crashing through it? [315] <A. Yes.

Q. The chaining and the locking of the San Jose

store, or the San Jose warehouse and the downtown

San Jose store, that is, the Stevens Creek store, the

downtown San Jose store and the San Jose ware-

house, was that discussed? A. Yes, I believe they

discussed that.

Q. Why was it necessary to chain and lock those

stores and warehouses, any reason given? A. I

don’t know.

Q. Now, Mr. Pedlow at that time, Maguire Com-

pany’s Mr. Pedlow, in fact told the people assembled

at this meeting that Continental had lest its bank

connections, isn’t that true? A. I don’t know that

he said that they had lost them, he may have. There

was a reference to the banking connections; IT am not

sure what it was.

105

Q. There was a reference made to Continental’s

banking connections, was there not? A. Yes, both

retail and banking connections.

Q. And Mr. Pediow in substance said that Conti-

nental’s banking connections had probably been jeo-

pardized, isn’t that the substance of what he said?

A. Something to that effect.

Q. To the group of people? A. Yes, I believe so.

[316] Q. And further that Continental’s retail

sales of contract paper, that is, the consumer paper

that they sold to banks, that that part of their busi-

ness had possibly been jeopardized? A. I believe

that he made reference to that, yes.

Q. And he said that if that were the case Conti-

nental would suffer sales losses; he told the people

that, didn’t he? A. I think that he did. There was

general conversation on that.

Q. In fact, didn’t Mr. Pedlow tell the people there

at that meeting that this discounting of consumer

contract paper was the backbone of Continental’s

business? A. I believe that that was referred to,

yes.

Q. And if it was lost Continental was going to

suffer? A. I believe so.

Q. Now, Mr. Lockhart, the controller, Sylvania

controller, had a conversation with Mr. Rivers, the

Sylvania credit manager, in front of the rest of the

people at this meeting concerning a man by the name

of Bob Marks. Do you recall that? <A. Yes, it was

Mr. Rivers.

Q. Yes. A. Okay.

106

Q. And Mr. Lockhart in fact asked Mr. Rivers to

call [817] Mr. Marks, did he not? A. Was it Mr.

Rivers or Mr. Lopolito?

Q. Well—— A. I’m not sure.

Q. Allright. A. I would like to clarify it.

Q. At Page 513, Line 24:

“Q. Now, at this meeting didn’t Mr. Lockhart

ask Tom Rivers if he was acquainted with the so-

called manager by the name of Bob Mark?

“A. Right.” -

The Witness: Okay.

Mr. Miller: Going to Page 514:

“Q. What did Mr. Rivers say?

“A. He said yes, that he knew Mr. Mark.

“Q. Didn’t he tell Mr. Lockhart he was a per-

sonal friend and had known Mr. Mark for a

number of years?

“A. Yes, he said that he was a personal friend

of his and that he had known him for some time.”

Q. Now, that refreshes you? A. Yes. Thank

you.

Q. Now, as a matter of fact, Bob Mark was the

credit manager for Philco, wasn’t he? A. I believe

he was. I’m not acquainted with Mr. Mark.

Q. All right, sir. And Lockhart, the Sylvania

[318] controller, asked Rivers, the Sylvania credit

manager, to call Mr.. Mark immediately to tell him

what Sylvania-Maguire had done with the Conti-

nental, isn’t that right? A. I don’t know whether

he said immediately. I think he did ask him if he

would call him that evening.

107

Q. Didn’t he ask Mr. Rivers to call that evening?

A. Yes, I think that he did, yes.

Q. Mr. Rivers responded, did he not, that he was

a personal friend of Bob Mark, the Phileo man, and

that he knew that Bob Mark had a sick child and he

didn’t wish to bother him that night? A. Yes.

Q. And further didn’t Mr. Lockhart respond,

“Well, if that’s the case, be sure and call him the

first thing in the morning?” A. I believe so.

Q. And further didn’t Lockhart tell Rivers to call

him in the morning before he goes to work? A. I

believe he suggested that.

Q. Right. So apparently Mr. Lockhart, at least,

indicated some urgency; is that your understanding ?

A. I believe so, yes.

Q. And Lockhart specifically told Rivers for Riv-

ers to inform Bob Mark of Philco as to the actions

taken that day? [319] A. Yes.

Q. Now, Mr. French, after the repossession had

been completed, do you know where the merchandise

was stored? A. I learned later, yes.

Q. How about the merchandise repossessed from

the Sacramento store, was that stored in Sacramento?

A. Yes. |

Q. And how about the merchandise from the Geary

Street store in San Francisco, was that stored in

San Francisco? A. I believe so.

Q. Would the same be true for Salinas? A. Yes.

Q. And San Jose? A. Yes.

Q. Now, is it not a fact that Sylvania purchased

back from Maguire all of the merchandise repossessed

108

from Continental T.V.? A. I would believe so. I

don’t know.

Q. Well, as a matter of fact, you resold that mer-

chandise yourself? A. I resold it, but——

Q. All right. And who did you sell it to? A.

Alko-Paramount.

Q. Alko-Paramount in San Jose? [820] A. Yes,

sir.

Q. And that was accomplished late October, early

November sometime? A. Somewhere in there.

Q. Okay. Of course, by that time wasn’t it called

Aiko-Nelson, was there an Alko-Nelson also fran-

chised? <A. It was a partnership that was formed

with two Nelson stores and one Aiko-Paramount store

and for delivery clarification they called the two Nel-

son stores Alko-Nelson, just for significance for a few

months.

Q. ‘So by the time you resold the merchandise re-

possessed from Continental T.V. Alko-Paramount,

the dealer you had franchised in August, had become

a chain around San Jose, had three or four stores?

A. They had three stores when I franchised them.

Q. Okay. And they were a competitor of Conti-

nental in San Jose? A. They could be called a com-

petitor, they are in the same town.

Q. Excuse me, Santa Clara was where Continental

was. San Jose they had one store. They could be a

competitor, yes.

Q. Santa Clara County. A. Santa Clara County.

Q. Now, did Sylvania pay the freight or the ship-

ment [321] of all this merchandise to Alko-Nelson

and Alko-Paramount? A. No.

109

Q. They did not? A. Not all of it.

Q. Well, they paid the freight for the shipment of

sets from San Francisco to San Jose, didn’t they?

A. Yes.

Q. From Salinas? A. Yes.

Q. And whenever was necessary for freight from

San Jose to Alko-Paramount stores, San Jose ware-

house? A. Yes.

Q. It was only in Sacramento that Alko-Nelson

was asked to pay the freight? A. Yes.

Q. Something approaching $80,000 worth of mer-

chandise? A. I believe so.

Q. Now, there was some color merchandise in that

repossessed lot of merchandise, weren’t there? A.

I’m sure there was.

Q. Was any of that colored charged against Alko-

Paramount or Alko-Nelson’s allocations? A. I don’t

believe so.

Q. So that Alko-Paramount got whatever their

allocation [322] turned out to be plus they received

the color sets in the repossessed merchandise, nght?

A. Yes.

Q. Do you have any recollection as to how much

business Alko-Paramount did with your company in

1966? A. I would only be making a guess at this

point.

Q. I don’t want you to do that.

Isn’t it a fact, sir, that Alko-Paramount took every

eolor set made available to it from the fall of 1965

through most of 1966? A. I don’t believe so.

- Q. Did not Alko-Paramount at times demand more

color sets than they were allocated? A. Through

110

the fall of 65 and maybe the first couple months of

66.

Q. Of course, many dealers were doing that at

that time? A. Yes, that was the big color demand.

Q. Now, the fact that Continental had spent over

a period of two years substantial monies advertising

and promoting the Sylvania name in not only San

Jose, Salinas, San Francisco, Oakland, didn’t that

inure to the benefit of Aiko-Nelson in San Jose

and the dealer you put on in Salinas after Conti-

nental was terminated? A. It may have.

[323] Q. You did put a dealer in Salinas on

after Continental’s termination, didn’t you? A. Yes,

sir.

Q. Packwood’s? A. Yes.

Q. Really a replacement for Continental? A. It

was another dealer.

Q. Well, you didn’t put them on until Continental

was terminated, did you? A. No.

Q. How did you do on your quota, Mr. French, in

1965? Did you make your quota? A. I believe I

did.

Q. As a matter of fact—— A. Pretty close to

it.

Q. When you say “made your quota” you are talk-

ing about 120 percent of the established quota, right?

A. Yes.

Q. So you made at least 120 percent of your

quota, right? A. Well, I am not sure of the figure,

but I made my quota, I believe.

Q. That was 1.2 million that year? A. Some-

where in that area.

111

Q. Now, even though Continental was terminated

in [824] October and received very little shipment

after March and April, how much would you say of

your total territory purchases did Continental ac-

count for in 1965? A. Gee, I don’t know. Forty

percent, maybe, somewhere in there.

Q. Wasn’t it closer to 60 percent of your total ter-

ritorial purchases? <A. In ’65?

Q. Yes, sir. A. I don’t know.

Q. I refer to Page 88, Line 9:

**Q. What percent of these purchases were for

colored products in 1965?

“A. I would say the overall picture was,

would be around 60 to 70 percent.

“Q. And what percent of your total purchases

were attributable to purchases by Continental

Television in 1965”——

Skipping to Line 17.

“Q. Now, I am asking for 1965.

“A. Somewhere between 50 and 60, around 50

“percent.”

So with that refreshment of your recollection is it

fair to say that Continental, even though it didn’t re-

ceive many shipments after March of 1965, still at-

tributed about 50 percent of your total territory

purchases that year?

[325] A. Evidently they did.

Q. Now, I think on Friday you mentioned that the

shortage period as far as you can remember was over

sometime in the summer of 1966, Mr. French. Is it

not a fact, however, that Sylvania continued to al-

112

locate color television sets to its dealers through No-

vember of 1966? A. I’m not sure.

Q. Could be? A. It could be, but many of the

dealers were not taking their full allocation, starting,

I believe, in March or April of that year.

Q. Well, starting with the allocation made for the

tirst allocation period which was September and Oc-

tober of 19657 A. Yes.

Q. Is that true? A. Yes.

Q. Starting with the first allocation period it is a

fact that the allocations made by Sylvania for their

approved dealers increased right on through 1965 and

through 1966 each allocation period, didn’t they? A.

Yes, I believe they did.

Q. And even though you mentioned that some

dealers didn’t use all their allocations, certainly it is

a fact that many dealers needed more color than they

were able to [826] get, particularly, in 65 and the

first part of 66? A. Right.

Q. Now, is it not a fact, Mr. French, that Conti-

nental T.V. was allocated a certain number of sets for

the first two allocation periods, September through

December of 19657 A. I don’t believe I ever got

an allocation on Continental T.V.

Q. You had no information about Continental’s

allocation? A. No, I don’t believe I was given a

formal allocation.

Q. When did you receive formal allocations for

the other dealers in your area? A. I believe it was

in September.

Q. Late in September? A. I’m not sure just

when it was.

113

Q. Now, Mr. French, at any time in 1965 were you

ever aware of a complaint by Maguire that Continen-

tal was not computing its maturity items correctly?

A. I don’t understand what you are talking about.

Q. Okay. You do know that under the Maguire

financing plan that after a dealer hus a financed item

on its floor for over six months the purchase price is

due Maguire for that item, correct? [827] A. Yes,

I believe that’s the term in there——

Q. That term refers to such an item, matured

item? A. Matured item, yes.

Q. Correct. My question simply meant to ask you

whether at any time during 1965 you heard any com-

plaints from anybody in Maguire that Continental

wasn’t computing their maturities correctly?; A. I

didn’t hear any complaints about it.

Q. Did you hear any such complaints from any-

body in your company? A. No.

[352] * * * Q. With respect, sir, to Continental

Television and its related corporations, do you know

what kind of sales technique they generally em-

ployed? If that’s understandable to you. A. Yes,

I believe I understand the question. Their sales were

made probably 90 percent in the home on telephone

leads.

Q. In the home on telephone leads? A. Yes.

Q. Is that the so-called home demonstration type

of method of selling? A. Yes.

Q. Did Continental T.V.’s ad feature free-home

demonstrations, that sort of thing? A. Yes.

114

Q. You mentioned the term advertising. Does

that mean they would advertise $3 or $4 per month

or per week? A. Yes.

Q. Rather than the total list price of the T.V.

set? A. Yes.

[353] Q. Did Sylvania, to your knowledge, or

you, to your knowledge, ever complain about this

method of pricing? A. Well, we like to build a bet-

ter image market wise than that.

Q. But aside from likes, performances, did you

ever make any formal compleint to Mr. Shahood?

A. Yes, I expressed my dislike for it.

Q. Did he go right ahead and contin e to use his

old policy? A. Yes.

We discussed that to some length at various times

as to the need for such elaborate stores and elaborate

displays, and the best stores in this whole area, but

yet selling 80 to 90 percent of his sales in the home.

There was very few customers that came in the stores

to buy, at least during my relationship with him.

But again, Mr. Shahood was building a business,

and he so informed me that this was one of the things

that would be necessary for him to get the volume

that was necessary to support these stores; that even-

tually he hoped that the stores could stand on their

own and maybe wouldn’t—he wouldn’t go into so

much of this type of advertising.

Q. Well, with this type of advertising feature, sir,

do you know what retail prices he was charging? A.

It varied, I believe. It wasn’t—it was higher [354]

115

than our suggested retail price, especially in home

demonstrations where he needed additional profits to

pay the salesman contacting in the homes.

Q. Did you, sir, or to your knowledge anybody at

Sylvania ever say to George Shahood that he had to

bring his prices into line with Sylvania’s suggestions ?

A. No. As a matter of suggestion I felt he might do

a better job if he did.

Q. Did you ever made any threat to cut off Mr.

Shahood or Continental T.V. by reason of the prices

he charged? A. No, sir.

Q. Was price ever discussed at any time in any

of the conversations you had and to which you have

testified in connection with Sacramento? A. No,

sir.

Q. Or Vallejo? A. No.

[375] * * * Q. Now, sir, you have testified in con-

siderable detail concerning the sequence of telephone

conversations which you had concerning Sacramento

during late August and early September, 1965. And

if I may, you described telephone conversations with

Mr. Hines, Mr Steiner, Mr. Morgan.

September 7 phone calls with Mr. Steiner did you

discuss or did Mr. Steiner discuss a credit hold?

A. I believe he informed me at that time that

there was a credit hold, that if Mr. Shahood asked

concerning the orders that I was to advise him that

there would be a hold [876] for a credit review. I

believe that’s the sequence.

116

Q. And that was a day or two after “ir. Shahood

had told you he was moving mervhaz.*:-* .ato Sacra-

mento? <A. Yes.

* * *

[388] * * * Q. In addition to that, Mr. Shahood

on behalf of Continental in Sacramento gave you an

order on the 13th of September which he wanted you

to place? <A. Yes, sir.

Q. And that order was for about $80,000 of mer-

chandise is that correct? A. Yes, sir.

Q. ‘So if those orders had been shipped, all three,

Mr. Shahood would have received about $255,000 in

merchandise from July through October, right? If

they had been processed and accepted? A. Yes, sir.

Q. And yet in Chicago he gave you an order for

$220,000, and then withdrew it, as you say? A. Yes.

Q. Is it still your testimony that you thought that

Continental T.V. was cutting down on its purchases

of Sylvania products in the fall? A. Strictly a mat-

ter of personal opinion.

I am still writing orders. I have nothing to do with

the credit. I am going to write orders just as long

as I can get them.

* #2 *#

Testimony of John T. Morgan

[395] * * * The Court: The usual procedure, la-

dies and gentlemen of the jury, is that where a per-

son is not available and you have a deposition, that

counsel read the question and that another lawyer

take the witness stand and he reads the answer.

117

That’s just in an effort to try to simulate the pro-

cedure in the event the witness was here.

The statements in these depositions were taken

under oath, and they have the same weight that you

would give the testimony of witnesses here personally.

You may proceed, counsel.

Mr. Miller: Thank you, Your Honor.

Commencing at page 4.

“Q. What is your full name, please?

“A. John Thomas Morgan.

“Q. Where do you reside, Mr. Morgan?

“A. 49 East Main Street, LeRoy, New York.

“Q. What is your official title with Sylvania

at this time?

[396] “A. President of Sylvania Entertain-

ment Products Corporation.”

Mr. Miller: Page 5.

“Q. How long have you been employed at Syl-

vania, Mr. Morgan?

“A. Since 1962.

* * *

[400] * * * “Q. Do you know how Sylvania

ranked in terms of total sales of television man-

ufacturers in 1962?

“A. Certainly not very high. I think it would

be right down at the bottom of the list.

“Q. Now in 1962, it is my understanding that

Sylvania did not have a direct dealer program; it

was a distributorship program, was it not?

“A. Right. It was distributors and branches.

They had a direct dealer program, had gotten

118

onto one, off of one, onto one, this sort of thing.

Again, 1962 they had nothing.”

[402] * * * “Q. So you met Mr. Anderson in

Fresno ?

“A. Yes.

“Q. What did you discuss with Mr. Anderson

at that point?

“A. I told him I thought Sylvania was a won-

derful lin

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