Appendix — McGraw-Edison Co. v. Soper

Supreme Court, U. S. ]

FILED

DEC 29 1976

—-

MICHAEL RODAK, JR., CLERK

In The

Supreme Court of the United States

October Term, 1976

16-899 ©

McGRAW-EDISON COMPANY,

Petitioner,

Vv.

BETTY SOPER and JEFFSON INDUSTRIES, INC.,

Respondents.

O—

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

L

» @n

APPENDICES A AND B

th

—_—

Matcotm ID. Youne

1500 City National Bank Building

Omaha, Nebraska 68102

Attorney for Petitioner

a

COCKLE PRINTING CO., 1822 St. Mary's Ave., Omaha

INDEX

Page

Appendix A—Opinion of the Eighth Cireuit Court

2 ee A.1

Appendix B—Judgments of the United States District

Court for the Western District of Missouri, West-

ern Division. ...................... B.1

Appendix B—Findings of Fact and Conclusions of

Law on Issues Submitted for Determination by

Se SOE ‘sicdatinadhineda mre a . B.4

A. 1

APPENDIX A

IN THE

UNITED STATES COURT OF APPEALS,

EIGHTH CIRCUIT

James E. Northern and Shirley Northern,

Plaintiff s-Appellees,

vs.

McGraw-Edison Company,

Defendant-Appellant,

Betty Soper and Jeffson Industries, Inc.,

Intervenors-Appellees.

No. 75-1738

Submitted April 16, 1976

Decided Sept. 29, 1976

Rehearing and Rehearing En Banc

Denied Nov. 15, 1976

Before GIBSON, Chief Judge, ROSS and HENLEY,

Cireuit Judges.

GIBSON, Chief Judge.

Defendant, MeGraw-Edison Company (McGraw), ap-

peals from a judgment entered by the District Court' upon

a jury verdict in favor of plaintiffs James and Shirley

Northern (Northern), Betty Soper and Jeffson Industries,

Ine. (Jeffson),? on various antitrust and fraud claims.

| The Honorable Elmo B. Hunter, United States District Judge for

the Western District of Missouri.

2 The initial complaint in this action was filed against defendant by

plaintiff Northern on December 29, 197!. Betty Soper's motion to

intervene pursuant to Fed. R. Civ. P. 24(b) was granted on July 31,

1972. J was permitted to intervene as plaintiff on Sep-

tember 6, 1972.

A. 2

This litigation arose out of the sale to plaintiffs of four

Arnold Palmer Cleaning Centers (A. P. Centers), which

were distributed by defendant through its dealer, John

Jacobson.’ Northern and Soper each purchased one of

the A. P. Centers and Jeffson purchased two.

Plaintiffs’ individual complaints sought a judgment

against defendant on three counts. Count I alleged that

defendant violated § 3 of the Clayton Act, 15 U.S.C. $14

(1970), and § 1 of the Sherman Act, 15 U.S.C. $1 (Supp.

V, 1975), by distributing A. P. Centers pursuant to an il-

legal tying arrangement in which the purchaser was ob-

ligated to purchase equipment and incidental materials

from defendant in order to secure the A. P. Center fran-

chise and “Arnold Palmer” trademark. Count IT alleged

that defendant and Jacobson made certain misrepresenta-

tions to induce plaintiffs to purchase the A. P. Centers

and that plaintiffs were entitled to actual damages for

economic injury sustained due to these false statements.

Count IIT alleged that the misrepresentations in Count IT

were made willfully and maliciously and that plaintiffs

were entitled to punitive damages.

3 There were actually five separate A.P. Center purchases initially

involved in this case. However, as to the purchase by Jeffson

of the A.P. Center at Noland Plaza Shopping Center in Inde-

ey Missouri, the jury awarded no monetary relief. There-

ore, the facts surrounding the purchase of the Noland Plaza store

will not be discussed in this opinion.

4 Plaintiffs also alleged that defendant practiced price discrimination

in the distribution of the A.P. Center franchises in violation of

the Robinson-Patman Act. 15 U.S.C. §§ 13, 13a (1970). How-

ever, this claim was not submitted to the jury and we have no

occasion to discuss it on this appeal.

A. 3

In order to better comprehend the nature of the case,

it is beneficial to initially review the relationship between

Jacobson and defendant, to consider the activities of Ja-

cobson preceding the sales of the A. P. Centers to the

plaintiffs and to discuss the method of distributing A. P.

Centers utilized by defendant. Thereafter, each plaintiff’s

case will be segregated and the facts relating to each pur-

chase summarized.

In 1965 Jacobson, who maintained interests in various

dry cleaning operations, attended a National Institute of

Dry Cleaners convention. At that convention he met with

two representatives of the Arnold Palmer Cleaning Cen-

ter Sales Division (A. P.C.C.S.), which was the division

responsible for distributing A. P. Centers on defendant’s

behalf. After extolling the economic virtues of a dry

cleaning franchise identified with the name of Arnold

Palmer, the representatives induced Jacobson to become

an authorized dealer of A. P. Centers. Following his exe-

eution of the dealership agreement, Jacobson attended nu-

merous indoctrination meetings with A. P. C. C.8. person-

nel, where he was advised of how to sell, promote and ad-

vertise A. P. Centers. He was also instructed on how to

fill out the various forms which had been printed by

A. P.C.C.S. and which were required to be used in con-

summating the sales of A. P. Centers. In addition to pro-

viding Jacobson with printed sales forms, A. P.C.C.S.

forwarded catalogs, machinery price lists, site evaluation

forms, financial projection forms for prospective franchis-

ees, advertising manuals, dealer memoranda and _ periodic

newsletters to Jacobson.

Armed with his training and promotional materials,

Jacobson proceeded to sell A. P. Center franchises to in-

A. 4

terested investors. Favorable locations for A. P. Centers

were hard to find and, since a dealer had not always se-

cured a willing buyer of a franchise when a good location

became available, A. P.C.C.S. encouraged Jacobson and

other dealers to utilize a purchase-resale procedure as a

method of distributing A. P. Centers. Pursuant to this

procedure, a dealer would select a favorable location for

an A. P. Center and secure confirmation of his selection

from A.P.C.C.S. Upon confirmation, the dealer would

personally execute a lease for the location. The dealer

would then enter into a franchise agreement with A. P. C.

C.8., which authorized the dealer to use the name ‘‘ Arnold

Palmer” in association with the dry cleaning business for

a period of five years. Finally, the dealer would execute

a Sign and Back Drop Lease Agreement with A. P. C.C. 8.

which permitted the dealer to place a large “Arnold Palm-

er Cleaning Center” sign on the exterior of the building

and to use a specially designed back drop in the interior.

The dealer would also arrange to make the A. P. Center

operational by purchasing all equipment from A. P. C.C.S.

at dealer’s cost. In most instances, the dealer would fi-

nance the equipment purchase through Edison Aeeceptance

Corporation (E. A.C.), which, like A. P.C.C.S., was a

subsidiary of defendant McGraw.

The dealer would thereafter attempt to sell the A. P.

Center as a “package deal’’ to prospective franchisees. If

such a sale were arranged, the dealer and the franchisee

generally executed three documents: (1) an assignment

of the lease on the location from the dealer to the fran-

chisee; (2) an assignment of the Sign and Back Drop

Lease Agreement with A. P.C.C.S. from the dealer to

A. 5

the franchisee; and (3) an Assumption Agreement by

which, upon E. A. C. approval, the franchisee would secure

rights to the A. P. Center equipment by taking over the

dealer’s payments to E.A.C. A dealer would negotiate

for the highest price obtainable when marketing A. P. Cen-

ters in this fashion. The dealer would be entitled to any

profit secured from the sale.

In three of the four A. P. Centers involved in this liti-

gation, Jacobson utilized this purchase-resale procedure.

Of these three, one was sold to plaintiff Soper’s husband

and two were sold to plaintiff Jeffson. The fourth A. P.

Center, purchased directly by Northern, had not previous-

ly been rendered operational by Jacobson, nor had Jacob-

son become a franchisee for that Center. Each of these

sales will be discussed below in relation to the individual

plaintiff’s case.

A. Northern v. McGraw-Edison Company. The liti-

gation as to Northern arose out of the purchase of an

A.P. Center in Raytown, Missouri. Northern was an

architect who became interested in a dry cleaning opera-

tion for investment purposes. Northern contacted Jacob-

son, who showed Northern a potential Raytown location.

Jaegbson also completed for Northern’s benefit a Financial

Projection Form, which had been printed by A. P.C.C.5S.

and which reflected that Northern could anticipate a

monthly income in excess of $1,000 from the A. P. Center.

‘Northern eventually agreed to become a franchisee and he

and Jacobson executed a lease for the Raytown location.

Northern signed the A. P. C.C.S. franchise agreement, as

well as the Sign and Back Drop Lease agreement, on June

28, 1967. Northern was informed by Jacobson on numer-

A. 6

ous occasions that in order to obtain the franchise, the

franchisee must purchase the whole equipment package.

Furthermore, the franchise and equipment were billed as

a package item. No detailed or listed price was invoiced

for the separate items making up the package. According-

ly, the package of equipment was sent by A. P.C.C.S. to

Jacobson, who in turn sold the equipment to Northern for

approximately $30,000.

At trial in the District Court, Northern’s Count I

claim that defendant’s mode of distribution constituted

an illegal tying arrangement was dismissed.’ On the

Count IT misrepresentation claim, Northern was awarded

$15,000 by the jury. Northern also received a $100,000

award of punitive damages pursuant to Count IJI.

B. Soper v. McGraw-Edison Company. Soper’s claim

emanates from the purchase by her husband of an A. P.

Center in Liberty, Missouri. This Liberty A. P. Center

was purchased from Jacobson pursuant to the purchase-

resale distribution procedure outlined above. Jacobson

had become the franchisee of the Liberty store in Decem-

ber, 1965. He purchased the equipment for the store from

A. P.C.C.S. at dealer’s cost and financed the purchase

‘through E.A.C. Jacobson then sold the Liberty A. P.

Center to Soper’s husband on October 10, 1968. The par-

ties then executed an assignment of the franchise agree-

ment and the Sign and Back Drop Lease agreement. Also,

5 While the record is not clear on this subject, it appears that

Northern's antitrust claim was dismissed as being untimely filed.

Northern's purchase of the Raytown A.P. Center was essentially

consummated on June 28, 1967. Therefore, the filing of the com-

plaint on December 29, 1971, was not timely in light of the four

year statute of limitation contained in 15 U.S.C. § 15b (1970).

A. 7

Soper’s husband assumed Jacobson’s E. A.C. obligation.

Soper’s husband died in 1970 and Soper operated the store

until it was eventually sold on December 31, 1972. At trial

Soper obtained a jury award of $10,000 on her Count I

antitrust claim (trebled to $30,000 by the court), $8,000

for fraud, $100,000 in punitive damages on Count IIT and

attorneys’ fees of $36,200.

C. Jeffson v. McGraw-Edison Company. In 1963

Jacobson and Roy Jeffress organized and incorporated

Jeffson Industries, Inc., for the purpose of establishing

a chain of coin-operated car washes. In late 1966 the prin-

cipals of Jeffson decided that Jeffson should diversify

and expand into the dry cleaning business. Pursuant to

this decision, Jeffson purchased two® A. P. Centers trom

Jacobson. These stores were located at 95th and Blue

Ridge in Kansas City, Missouri (Blue Ridge store), and

the Gladstone Plaza Shopping Center in Gladstone, Mis-

souri (Gladstone store). Both stores were purchased by

Jeffson from Jacobson pursuant to the purchase-resale

distribution method.

Jacobson purchased the equipment for the Blue Ridge

store in 1965 and executed the requisite franchise agree-

ment at that time. The store was set up as a pilot store

where potential franchisees could view the typical opera-

tion of an A.P. Center.. In 1969 Jeffson purchased the

Blue Ridge store from Jacobson. Jeffson assumed the

halanee of Jacobon’s E. A. C. obligation and tendered $20,-

6 Although Jeffson purchased a total of three A.P. Centers, only

two are relevant to the matters presented on this appeal. See

note 3 supra.

A. 8

0OU in cash and a $16,424 promissory note to Jacobson.

All of the necessary assignments were completed.

As to the Gladstone store, it had been equipped by

Jacobson in 1966. Jeffson agreed to purchase the Glad-

stone A. P. Center by assuming Jacobson’s E. A. C. obliga-

tions, paying Jacobson $24,000 in cash and giving a prom-

issory note for $13,100. Again, all of the necessary as-

signment documents were duly executed.

Jeffson was awarded $52,000, trebled to $156,000 by

the court, for the antitrust violations attendant to the pur-

chase of the Blue Ridge and Gladstone stores, and attor-

neys’ fees of $54,300. The jury denied relief on the Count

Il misrepresentation claim and the Count III punitive

damage claim.

l. Agency Issue.

The initial issue raised on this appeal involves the

question of whether Jacobson was an agent for defendant

when he was engaging in the negotiation and sale of the

A. P. Centers in this case. Plaintiffs’ case is wholly de-

pendent upon Jacobson occupying an agency status since

Jacobson was the ostensible seller and was intimately in-

volved in all transactions giving rise to the damage awards.

Jacobson’s agency status is indispensable to plaintiffs’

fraud claims since it is contended that Jacobson made sev-

eral misrepresentations while acting as defendant’s agent

and that the misstatements are therefore imputable to de-

fendant. Furthermore, as to the antitrust charges, plain-

tiffs contend that Jacobson was acting within the scope

of hie agency while participating in the purchase-resale

distribution procedure and that the sales to plaintiffs

should be treated as direct sales from defendant.

A. 9

Defendant, on the other hand, disclaims any control

or influence over Jacobson’s distribution activities and al-

leges that Jacobson was acting as an independent contrac-

tor im the A. P. Center sales. Defendant asserts that it

discontinued all significant involvement in the distribution

of A. P. Centers after dealers such as Jacobson became

franchisees of their own A. P. Centers and that second-

level sales between Jacobson and plaintiffs in this case

were beyond its control. Defendant contends that the evi-

dence is insufficient to show that Jacobson was an agent

and vigorously contends that the District Court should

net have submitted that issue to the jury.

The traditional formulation of what consti-

tutes an agency relationship is as follows:

Agency is the fiduciary relation which results from

the manifestation of consent by one person to another

that the other shall act on his behalf and subject to

his control, and consent by the other so to act.

Restatement (Second) of Agency § 1 (1958); accord, Leidy

v. Taliaferro, 260 S. W. 2d 504, 505 (Mo. 1953).

In assessing whether an individual occupies the status of

an agent, it is necessary to review the facts and circum-

stances surrounding that individual’s activities to deter-

mine whether the purported principal exerts the requisite

control over the individual so as to create an agency rela-

tionship.’ Aetna Insurance Co. v. Glens Falls Insurance

7 The dealership contract in this case characterized Jacobson as an

independent contractor. This characterization is not controlling on

the agency question. If the surrounding facts evidence an agency

relationship, ver ‘artfully disguised’, the parties cannot ne-

gative its existence by re oo pry that it is something other than

an agency relationship. Board of Trade v. Hammond Elevator Co.,

198 U.S. 424, 437-38, 441, 25 S.Ct. 740, 49 L. Ed. 1111 (1905).

A. 10

Co., 453 F. 2d 687, 690 (5th Cir. 1972). Since this deter-

mination requires the finding and weighing of numerous

facts, the ultimate resolution is appropriately left to the

province of the jury in most instances. Wood v. Holiday

Inns, Inc., 508 F. 2d 167, 173 (5th Cir. 1975); Baker v. St.

Paul Fire & Marine Insurance Co., 427 8S. W. 2d 281, 293

(Mo. App. 1968). It is only where the facts are not in

dispute and there is no real issue for the jury to resolve

that the trial court should rule on the agency issue as a

matter of law. Burriss v. Texaco, Inc., 361 F. 2d 169, 174

(4th Cir. 1966); Baker v. St. Paul Fire d& Marine Insur-

ance Co., supra at 293.

We have reviewed the extensive record in this

ease and conclude that, although the question is a close

one, the Distriet Court did not err in submitting the agen-

cy issue to the jury. There was sufficient evidence ad-

duced at trial to support plaintiffs’ contention that defend-

ant exerted influence and control over significant aspects

of Jacobson’s distribution activities.

Prior to becoming a dealer for defendant, Jacobson

had substantial experience in the dry cleaning industry.

He had operated seven dry cleaning plants and some for-

mal wear rental establishments in the greater Kansas City

area. Jacobson was appointed as a dealer for defendant

originally for the western counties of Missouri, but his

area was later extended to cover Kansas, Oklahoma and

Colorado. In performing his dealership responsibilities,

Jacobson paid his own office expenses and overhead ex-

cept for the supplies and forms furnished to him by de-

fendant. At defendant’s urging, Jacobson listed himself

as an “Arnold Palmer Dealer” in the Yellow Pages of the

A. Il

telephone directory; defendant, through A. P. C. C.S., paid

one-half of the cost of that listing.

After Jacobson executed defendant’s dealership con-

tract, defendant undertook an extensive and continuous

campaign through A. P.C.C.S. to direct Jacobson in the

distribution of the A. P. Centers. Jacobson attended nu-

merous sales meetings at which he was instructed as to

how to complete the many A. P. C. C.S.-prepared forms.*

Jacobson was also encouraged to distribute pursuant to

the purchase-resale system and to hire salesmen to pro-

mote the sales effort. In line with this method of opera-

tion, Jacobson attempted to secure favorable locations for

A. P. Centers by placing ads in the local paper. When

Jacobson selected a site for a proposed A. P. Center, his

selection was forwarded to A. P.C.C.S. for confirmation

and at least one A. P. C. C.S. official testified that A. P. C.

C. S. was empowered to instruct Jacobson that the site was

unacceptable and should not be used for an A. P. Center.

A. P.C. C.S. disseminated price lists which set forth the

prices at which various A. P. Centers should be sold. A. P.

C. C. 8. also established sales quotas for its dealers which

were characterized as advisory, not mandatory. However,

some dealers were terminated for failing to achieve a suffi-

cient volume of orders. A. P.C.C.S. paid a portion of

8 In addition to training dealers in the proper way to fill out the

printed forms, A. P.C.C.S. was vigilant in assuring that the forms

were completed in accordance with A.P.C.C.S. standards. In

1970 A. P.C.C.S. notified dealers that the submission of contracts

and supplemental documents which had been dated by dealers

prior to filing “seriously endangerled] [A. P.C. C. S.'s] legal posi-

tion." Dealers were informed that all contracts receiv

= C.S. must be undated or they would be returned to the

A. 12

Jacobson’s advertising expenses and supplied him with

brochures and other material to facilitate distribution of

A. P. Centers. In 1967 A. P.C.C.S. personnel attended

a franchise show in Kansas City, talked with prospective

franchisees and encouraged them to purchase A. P. Cen-

ters from Jacobson. A. P.C.C.S. also provided its deal-

ers with sales leads and prodded the dealers to submit

reports as to the outcome of the contacts with these pros-

pects.

We believe the evidence, viewed in its entirety, sup-

plied an adequate showing of control by defendant over

Jacobson’s activities to justify submission of the agency

issue to the jury. While there is conflicting evidence from

which contrary inferences can be drawn, there is also sub-

stantial and competent evidence that supports the District

Court’s decision to permit the jury to resolve this issue.

The evidence is not so demonstrably clear, as contended by

defendant, as to command only one result. To the con-

trary, there is evidence from which the jury could have

inferred that defendant directed and controlled Jacobson

in the distribution of the A. P. Centers. We therefore

accept the jury’s finding that Jacobson was acting as de-

fendant’s agent when distributing the A. P. Centers to the

plaintiffs and think that this finding has sufficient evi-

dentiary support in the record.

Il. Antitrust Claims.

Defendant assails the jury’s finding that the

method of distributing A. P. Centers constituted an illegal

tying arrangement in contravention of ¢1 of the Sherman

A. 13

Act. 15 U.S.C. § 1° A tying arrangement exists when a

person agrees to sell one product (the tying product) only

on the condition that the vendee also purchase another

product (the tied product). Northern Pacific Ry. v. United

States, 356 U.S. 1, 5-6, 78 S.Ct. 514, 2 L. Ed. 2d 545

(1958). The pernicious effect on competition from such

an arrangement is clear. The distributor using such a

method is utilizing its power and position in the tying

product market to gain competitive leverage in the tied

product market. Vendees desirous of purchasing the tying

product are of necessity forced to abdicate their free will

and purchase the tied products from the distributor of the

tying product regardless of whether there are items of

greater quality and less expense in the tied product mar-

ket. Times-Picayune Publishing Co. v. United States, 345

U. S. 594, 605, 73 S. Ct. 872, 97 L. Ed 1277 (1953). Com-

petitors in the tied product market are similarly disadvan-

taged since they are unable to offer their products to tne

consuming public on an equal basis with the distributor

of the tying product. United States v. Loew’s Inc., 371

U. S. 34, 44-45, 83 S. Ct. 97, 9 L. Ed. 2d 11 (1962). In

short, ‘‘[t]ying arrangements * * * flout the Sherman

9 In their complaints plaintiffs also contended that the tying arrange-

ment violated § 3 of the Clayton Act. 15 U.S.C, § 14. In order

to prevail under § 3, — s must establish that the tying item,

the A. P. Center franchise, constitutes ‘goods, wares, merchandise,

machinery, supplies, or other commodities." We need not, for

urposes of this case, determine whether a tying arrangement

involving a franchise would be cognizable pursuant to 43 of the

Clayton Act. See Ungar v. Dunkin’ Donuts of America, Inc., 53!

F.2d 1211, 1215 n. 4 (3d Cir. 1976). The antitrust claim was sub-

mitted to the jury solely on the basis of § | of the Sherman Act

and plaintifis do not urge the applicability of Clayton Act § 3 on

this appeal.

A. 14

Act’s policy that competition rule the marts of trade.’’

Times-Picayune Publishing Co, v. United States, supra

at 605, 73 8. Ct. at 878.

Since tying arrangements inevitably hurt com-

petition in the tied product market, they ‘‘fare harshly

under the laws forbidding restraints of trade.’’ Times-

Picayune Publishing Co. v. United States, swpra at 606,

73 $8. Ct. at 879. Such arrangements constitute per se

violations of 41 of the Sherman Act when the evidence

establishes the following essential elements: First, that an

individual has actually tied two separate and distinct pro-

ducts into a single package, Times-Picayune Publishing

Co. v. United States, supra at 614, 83 8S. Ct. 97; second,

that the individual possesses sufficient economic power in

the tying product market to appreciably restrain competi-

tion; and, third, that the arrangement affects a ‘‘not in-

substantial’? amount of interstate commerce. Northern

Pacific Ry. v. United States, supra at 6, 78 8, Ct. 514.

If the plaintiff proves a per se violation, the tying arrange-

ent. is automatically illegal and there need not be any

further judicial inquiry as to whether any unreasonable

competitive effects result. Fortner Enterprises, Inc. v.

United States Steel Corp., 394 U.S. 495, 498, 89S. Ct. 1252,

22 L. Ed. 2d 495 (1969).

In attacking the proof relating to the first element of

the per se formulation, defendant contends that its method

of distribution did not involve the aggregation of two sep-

arate products. It is defendant’s position that the enter-

prises purchased by plaintiffs constituted single, individ-

ual products in the form of ‘‘going businesses.’’ However,

a characterization ignores the realities of the situation.

A. 15

A franchise license constitutes a separate and

distinct marketable item. The weight of judicial author-

ity supports the proposition that if prospective franchisees

are compelled to purchase equipment or other tied products

in order to obtain the franchise and trademark, an illegal

tying arrangement exists. Warriner Hermetics, Inc. v.

Copeland Refrigeration Corp., 463 F. 2d 1002, 1012-1016

(5th Cir.), cert. denied, 409 U. S. 1086, 93 S. Ct. 688, 34

L. Ed. 2d 673 (1972); Siegel v. Chicken Delight, Inc., 448

F’, 2d 43, 47-49 (9th Cir. 1971), cert. denied, 405 U. S. 955,

92 S. Ct. 1172, 31 L. Ed. 2d 232 (1972) ; see Susser v. Carvel

Corp., 332 F. 2d 505 (2d Cir. 1964), cert. dismissed, 381

U. S. 125, 85 S. Ct. 1364, 14 L. Md. 2d 284 (1965). See

generally, Annot., 14 A. L. li. Fed. 473 (1973). We sub

seribe to this view. Defendant marketed a highly attrac-

tive franchise which offered the use of the Arnold Palmer

name and trademark to prospective franchisees. However,

the record is replete with evidence that prospective fran-

chisees could obtain the franchise and trademark only if

they also purchased the package of dry cleaning equipment

and incidental materials from defendant. Therefore, de-

fendant was marketing its A. P. Center franchises by using

an illegal tying arrangement as typified in the above cases.

Defendant seeks to avoid this result by in-

serting dealer/agents into its distribution scheme. De-

fendant argues that even if direct sales from it to fran-

chisees may constitute an illegal tying arrangement, a dif-

ferent resuit is mandated when the A. P. Centers are sold

by defendant to dealer/agents who in turn make the plants

operational and resell them as ‘‘going businesses’’. How-

ever, circumvention of the antitrust laws is not so easily

achieved. Substance, not form, controls our inquiry.

A. 16

United States v. Sealy, Inc., 388 U. 8S. 350, 352, 87 S. Ct.

1847, 18 L. Ed. 2d 1538 (1967). A distribution method

which is illegal when conducted by a manufacturer is not

rendered legal by the simple expedient of enlisting agents

to perform the same activity on behalf of and under the

control of the manufacturer. Just as a manufacturer can-

not avoid the price-fixing proscription of the Sherman Act

by setting up sham ‘‘agencies” to distribute its product at

a set price, Dr. Miles Medical Co. v. John D. Park & Sons,

220 U. S. 373, 398-99, 407, 31 S. Ct. 376, 55 L. Ed 502

(1911), defendant cannot avoid antitrust liability by hav-

ing agents under its direction and dominion market A. P.

Center franchises pursuant to the illegal tying arrange-

ment described above.

We stress what this case does not involve. This is

not a situation where there was an isolated sale of a going

business whereby the buyer was obligated to purchase the

entire operational package. Rather, this case presents a

deliberate distribution scheme in which dealer/agents were

initially sold a package comprised of a tying product and

numerous tied products and then were encouraged to dis-

tribute these ‘‘packages’’ to prospective franchisees. Ja-

cobson informed prospective franchisees that they could

secure the Arncld Palmer franchise only if dry cleaning

equipment and other materials were purchased in conjune-

tion with the franchise. This tying arrangement scheme

using agents, as opposed to independent contractors, as

conduits for the sale of A. P. Center ‘‘packages’’ in this

fashion is contrary to the policy and principles of the

Sherman Act. Cf. Beefy Trail, Inc. v. Beefy King Inter-

national, Inc., 348 F. Supp. 799, 806-07 (M.D. Fla. 1972).

A. 17

As to the seeond element of proof for the

per se rule, the record reflects that defendant possessed

sufficient economic power in the tying product market to

restrain competition. The record does not clearly reflect

the full extent of defendant’s power and position in the

dry cleaning franchise market, although defendant is re-

ferred to by plaintiffs as the world’s largest manufacturer

of laundry and dry cleaning equipment. Regardless, ‘‘ [t]he

standard of ‘sufficient economic power’ does not * * * re-

quire that the defendant have a monopoly or even a domi-

nant position throughout the market for the tying product.”

Fortner Enterprises, Inc. v. United States Steel Corp., 394

U.S. 495, 502, 89 S. Ct. 1252, 1258, 22 L. Ed. 2d 495 (1969).

Sufficient economic power exists if the distributor of the

tying product has sufficient leverage in the market to in-

crease prices or to force a significant number of buyers

to accept burdensome terms. Fortner Enterprises, Inc. v.

United States Steel Corp., supra at 504, 89 S. Ct. 1252.

The District Court in this case reviewed the record and

concluded that defendant’s franchise was unique in nature

and possessed a high degree of desirability to prospective

franchisees. We agree that these attributes of uniqueness

and desirability, coupled with the power of defendant to

impose the tying arrangement on buyers at an artificially

enhanced price, constitute sufficient economic power.

Fortner Enterprises, Inc. v. United States Steel Corp.,

supra; United States v. Loew's Inc., 371 U. 8. 38, 45, 83

S. Ct. 97 (1962).

10 Based upon the holding that the nature of defendant's product

and the extent of defendant's leverage in the market compel the

(Continued on next page)

A. 18

Defendant also contends that the third ele-

ment of the per se rule was not established since the sales

of A. P. Centers in this case were wholly intrastate in na-

ture; thus, no interstate commerce was affected. Regard-

less of how local the immediate effect of an activity might

be, it satisfies the jurisdictional prerequisite of the Sher-

man Act if the activity has a substantial and adverse effect

on interstate commerce. Gulf Oil Corp. v. Copp Paving

Co., 419 U. S. 186, 195, 95 S. Ct. 392, 42 L. Ed. 2d 378

(1974). In determining the effect on interstate commerce,

‘*the controlling consideration is simply whether a total

amount of business, substantial enough in terms of dollar-

volume so as not to be merely de minimus, is foreclosed to

competitors by the tie * * *.’’ Fortner Enterprises, Inc. v.

United States Steel Corp., supra at 501, 89 S. Ct. 1252,

1258 ; see International Salt Co. v. United States, 332 U. 8.

392, 396, 68 S. Ct. 12, 92 L. Ed. 20 (1947). Defendant mar-

keted its franchised stores in over 30 states and, over a

six year period, sold nearly $9,000,000 in equipment and

other materials in association with the distribution of A. P.

Center franchises. Free competition in the tied product

market would have permitted numerous manufacturers,

otherwise foreclosed because of the tying arrangement, to

compete for a portion of the substantial market deliberate-

ly manipulated and controlled by defendant. See Hospital

Building Co. v. Trustees of Rex Hospital, —— U. S.

(Continued from previous page)

conclusion that defendant possesses sufficient economic power, we

such economic power can be automatic-

presumed in all cases when the tying product is a trademark.

v. Chicken Delight, Inc., a at 50, with Capital

in deg v. Olsten Corp., 506 2d 658, 663-64 (2d Cir.

A. 19

96 5S. Ct. 1848, 48 L. Ed. 2d 388 (1976); Burke v. Ford,

389 U. S. 320, 88 S. Ct. 443, 19 L. Ed. 2d 554 (1967).

Therefore, we agree with the District Court that a ‘‘not

insubstantial” amount of interstate commerce was affected.

Plaintiffs’ evidence in this case inexorably

indicates that defendant’s tying arrangement constituted

a per se violation of 41 of the Sherman Act. However,

courts have ruled that using tying arrangements as mar-

keting devices is not unlawful if defendant advances com-

pelling business justifications for their use. Susser v.

Carvel Corp., supra, 332 F. 2d at 519. One such justifica-

tion exists if defendant proves that a substitute for the

tied product must comply with such precise and detailed

specifications that other manufacturers may not be able

to market a product functionally compatible with the tying

product. Standard Oil Co. v. United States, 337 U. 8S. 293,

306, 69 S. Ct. 1051, 93 L. Ed. 1371 (1949); International

Salt Co. v. United States, supra at 397-98, 68 S. Ct. 12.

Another justification is that a small company may be com-

pelled to use tying arrangements in order to permit it to

scale the high barriers of entry into a new market. United

States v. Jerrold Electronics Corp., 187 F. Supp. 545, 557

(E. D. Pa. 1960), aff’d per curiam, 365 U. 8S. 567, 81 8. Ct.

755, 5 L. Ed. 2d 806 (1961); see Brown Shoe Co. v. United

States, 370 U. S. 294, 330, 82 S. Ct. 1502, 8 L. Ed. 2d 510

(1962). Defendant does not argue that either of these

justifications is applicable in this case and the evidence

fails to support their application. Defendant’s only as-

serted justification for the tying arrangement is that it is

more convenient for franchisees to invest in a business

enterprise in which all the necessary components are

A. 20

grouped together and marketed in one inseparable pack-

age. Even if franchisees’ convenience would be best served

by such an arrangement, a fact which has not been inde-

pendently established in this record, this alone would not

provide a basis for legalizing such an anti-competitive

method of distribution. We therefore conclude that there

is a legal and factual basis for supporting the antitrust

awards in this case.

Defendant also contends that the amount of

damages awarded for the antitrust claims lacks evidentiary

support. The parties concede that the measure of damages

in a tying arrangement case is the amount of the over-

charge, or the difference between the price paid for the

tied items and the fair market value of the tied items at

the time of purchase. Siegel v. Chicken Delight, Inc.,

supra, 448 F. 2d at 52; see Hanover Shoe, Inc. v. United

Shoe Machinery Corp., 392 U. 8S. 481, 488-89, 88 S. Ct.

2224, 20 L. Ed. 2d 1231 (1968). Plaintiffs presented an

expert witness who testified as to the fair market value

of the tied A. P. Center equipment at the time it was initial-

ly purchased by the respective plaintiffs. The jury had

before it the terms of the purchases by the plaintiffs. By

comparing these figures, the jury could calculate the

amount of the overcharge. The awards issued by the jury

were comfortably within the range of reasonableness. We

conclude that the jury awards did not rest on guess work

or speculation but rather were adequately supported by

evidence presented at trial. Bigelow v. RKO Radio Pic-

tures, Inc., 327 U. S. 251, 264-66, 66 S. Ct. 574, 90 L. Ed.

652 (1946).

A. 21

Ill. Fraud Claims.

Defendant contends that plaintiffs Northern and Soper

failed to present sufficient evidence to support the jury’s

awards on the fraud counts, The fraud counts were prem-

ised upon three alleged misrepresentations which had been

made to plaintiffs by defendant or Jacobson. These al-

legedly false statements were: (1) a representation by

Jacobson that an independent firm had conducted a na-

tional market survey to analyze the impact of the Arnold

Palmer name on the dry cleaning industry; (2) defend-

ant’s statement that every A. P. Center franchise would be

supported by a continuous program of local advertising at

no cost to the franchisee; and (3) Jacobson’s represen-

tation that the location of A. P. Centers had been analyzed

by utilizing a special form prepared for the dry cleaning

industry.

Missouri law, which concededly controls in this

diversity cause of action, defines fraud in its traditional

sense,

The elements of fraud are a representation; its falsity;

its materiality; the speaker’s knowledge of the falsity

or his ignorance of the truth; the speaker’s intent that

his statement should be acted upon by the person and

in the manner reasonably contemplated; the hearer’s

ignorance of the falsity of the statement; his reliance

on its truth; his right to rely thereon; and his conse-

quent and proximately caused injury.

Ackmann v. Keeney-Toelle Real Estate Co., 401 8. W. 2d

483, 488 (Mo. 1966).

Defendant’s primary contention is that the representations

made to plaintiffs were not false. Since plaintiffs pre-

A. 22

vailed on this theory at trial, we must consider the evi-

dence and all permissible inferences which can be derived

from that evidence in the light most favorable to plaintiffs

and all conflicts in the evidence must be resolved in their

favor. Illinois Terminal R.R. v. Feltrop, 130 F.2d 982,

984 (8th Cir. 1942).

Northern and Soper presented sufficient evi-

dence to support their claim that Jacobson misrepresented

the fact that an independent firm had analyzed the impact

of the Palmer name on the dry cleaning industry. Both

testified that Jacobson informed them that such a study

had been made and that it was determined that the Palmer

name would be ‘‘good’’ for the dry cleaning industry for

approximately 10 years. The evidence establishes that one

of defendant’s divisions, American Laundry Machinery In-

dustries, and not an’ independent firm, conducted an in-

vestigation which disclosed that an Arnold Palmer sponsor-

ship would be of economic benefit. Richard Lester, one

of defendant’s employees who set up the A. P. Center fran-

chising system, testified that the survey did not purport

to determine the value of the Arnold Palmer name in the

dry cleaning industry. Furthermore, there was no evi-

dence to support the statement that the Palmer name

would retain economic viability for 10 years. The repre-

sentations made by Jacobson in this regard were clearly

false.

The second alleged misrepresentation relates to

whether plaintiffs were informed that they would be sup-

plied by defendant with local advertising at no cost to

them. A promotional brochure distributed by defendants

and reviewed by plaintiffs contained the following: ‘*‘ Your

A. 23

Arnold Palmer Cleaning Center Franchise is backed with

a strong, continuous program of local and national adver-

tising in newspapers and magazines, on radio and televi-

sion.” This language gives rise to an implication that

franchisees would incur no cost in local advertising cam-

paigns promoting their A. P. Centers. Northern testified

he was led to believe that there would be no charge for

local advertising, relying upon the language of the bro-

chure. Soper testified that she was informed by Jacob-

son that part of her franchise fee would be used by de-

fendant to supply local advertising. However, Lester tes-

tified that defendant never intended to provide cost-free

local advertising to franchisees. While plaintiffs actually

received some advertising and promotional material from

defendant, the cost of placing local advertisements was not

assumed by defendant. We believe that there is sufficient

evidence in the record from which the jury could find

that plaintiffs were falsely advised that they would not

have to pay for local advertising."

There is also sufficient evidence to establish the

falsity of Jacobson’s representations in regard to the

analysis of the locations of A. IP. Centers undertaken by

11 In regard to the misrepresentation that local advertising would be

supplied at no cost, defendant relies heavily upon the testimony

of Soper in which she stated that "[i]n '69 we had no complaints

at all about what we received.’ Defendant contends that this

is an admission that Soper was not disenchanted with the type of

advertising support provided by defendant. Soper's testimony,

however, related to her receipt of promotional material and ad-

vertising mats sent by defendant. She stated that, although she

did not use much of the material, she had no complaints concern-

ing the material. That statement does not foreclose her fraud

claim which is premised not upon what she actually received but

what she failed to receive—cost-free local advertising.

A. 24

defendant. The promotional brochure sent to both North-

ern and Soper represented that ‘‘[defendant’s] exper-

ienced representatives are experts in seeking out ideal

locations and in analyzing these locations to determine

their maximum business potential.” While there was a

location analysis form used by defendant’s distributors,

the form had not been developed specifically for the dry

cleaning industry. Defendant’s forms were of the type

used for analyzing locations of gas stations, car washes and

supermarkets. There was no evidence to indicate that de-

fendant’s distributors possessed any expertise in finding

or analyzing the locations of A. P. Centers. We think that

there is sufficient evidence in the present record from

which the jury could have inferred that Jacobson had mis-

represented the source and utility of the location analysis

methods implemented by defendant.

Our review of the record discloses that there

was sufficient evidence to establish all the requisite ele-

ments of fraud. The jury was presented with sufficient,

although not substantial, evidence from which it could find

that fraudulent representations had been made to plain-

tiffs. We also conclude that, contrary to defendant’s alle-

gations, there was sufficient evidence to support the find-

ing that plaintiffs relied upon the false representations

and suffered injury because of them. We therefore will

not disturb the jury awards on the fraud counts.

IV. Damages and Attorneys’ Fees.

Defendant also contends that the amount of

actual damages awarded by the jury on the fraud counts

finds no evidentiary support in the record. In Missouri

the measure of actual damages for fraud ‘‘is the difference

A. 25

between the actual value of the property at the time pur-

chased and the value it would have had had the repre-

sentations been true.’’ Salmon v. Brookshire, 301 S. W. 2d

48, 54 (Mo. App. 1957). Although the amount of damages

is not required to be measured with exactness and preci-

sion, Dean Foods Co. v. Albrecht Dairy Co., 396 F.2d

652, 661 (8th Cir. 1968), the extent of damage must be

proved with reasonable certainty. Schmidt v. Central

Hardware Co., 516 8. W. 2d 556, 559 (Mo. App. 1974). The

jury is vested with broad discretion in establishing the

amount of damages as a review and weighing of facts are

inherent in this process. Gathright v. Pendegraft, 433

S. W. 2d 299, 317-18 (Mo. 1968).

In the present case, the jury was apprised of

the actual value of the A. P. Centers purchased by plain-

tiff’s Northern and Soper since the terms of ti.zir initial

purchases were placed in evidence. The testimony of

plaintiffs’ expert witness, Thomas Eads, provided a basis

for determining the value of the property had the mis-

representations been true. While the proof of actual dam-

age in this case could not be reduced to mathematical

exactitude, plaintiffs produced the best evidence available

and provided the jury with a reasonable basis for deter-

mining the extent of the loss. Moore v. St. Louis South-

western Ry., 301 8. W. 2d 395, 402-03 (Mo. App. 1957). We

think the awards of $15,000 for Northern and $8,000 for

Soper for actual damages are commensurate with the na-

ture and degree of injury incurred by those plaintiffs.

The jury also awarded Northern and Soper

each $100,000 in punitive damages. In Missouri punitive

damages are awarded for the purpose of punishing the

A. 26

wrongdoer and as an example and deterrent to others

engaging in similar conduct in the future. Chappell v. City

of Springfield, 423 S. W. 2d 810, 814 (Mo. 1968). Punitive

damages are allowed only when there is a finding of legal

malice. ‘‘Legal malice exists where a wrongful act is in-

tentionally done without just cause or excuse * *°.’’ Sch-

midt v. Central Hardware Co., supra, 516 S. W. 2d at 560.

We entertain some doubt as to whether the

present record provides a sufficient basis for punitive

damages. However, we are aware that questions of ‘‘in-

tent’? and ‘‘malice’’ are more appropriately suitable for

jury determination, not appellate review. Under Missouri

law, ‘‘[t]he question of whether or not punitive damages

shall be awarded and, if so, in what amount rests pecu-

liarly in the discretion of the jury.’’ Wisner v. S. 8.

Kresge Co., 465 S. W. 2d 666, 669 (Mo. App. 1971). We

shall therefore defer to the jury’s implicit finding that

there is sufficient legal malice to permit the awarding of

a certain amount of punitive damages. However, the

amount of damages, which also rests in the discretion of

the jury, ‘‘must have some reasonable relation to the in-

jury inflicted.’’ Wisner v. S. S. Kresge Co., supra at 669;

see Beggs v. Universal C.1.T. Credit Corp., 409 S. W. 2d

719, 724 (Mo. 1966); Schmidt v. Central Hardware Co.,

supra at 560. Our review of the record in this case con-

vinces us that an award of $100,000 to each plaintiff was

disproportionate to the injuries suffered and was an abuse

of discretion on the part of the jury. We think a punitive

damage award of $35,000 each to plaintiffs Northern and

Soper is at the outer range for punitive awards under the

et ve ~

A. 27

factual context of this case and accordingly reduce these

punitive awards to $35,000 each.

Defendant also contends that the District

Court’s approval of an attorneys’ fee award amounting to

$90,500 for the antitrust counts lacked evidentiary support,

did not differentiate between counts on which plaintiffs

did and did not prevail, and was exorbitant and unreason-

able. The awarding of attorneys’ fees rests in the sound

discretion of the District Court and a party attacking an

award of attorneys’ fees in an antitrust case ‘‘has the

burden of clearly demonstrating error as to the factual

basis, or abuse as to the discretional margin, involved in

[the] allowance.” Armco Steel Corp. v. North Dakota,

376 F. 2d 206, 212 (8th Cir. 1967). We conclude that the

award in this complex case was within the discretion of

the District Court and rested on an established factual

basis. The District Court was well aware of the counts

to which the attorneys’ fees related, the time spent, the

complexity of the issues and results achieved. We perceive

of no legal basis for disturbing these allowances.

We therefore affirm the District Court in all respects

except to reduce the punitive damage awards to Northern

and Soper to $35,000 each.

B. 1

APPENDIX B

In the United States District Court for the Western

District of Missouri, Western Division

NO. 19,978-4

JAMES E. NORTHERN and SHIRLEY NORTHERN,

Plaintiffs,

BETTY SOPER and JEFFSON INDUSTRIES, INC.,

Intervenors,

vs.

McGRAW-EDISON COMPANY,

Defendant.

JUDGMENT

This action under Count I of the complaint of Jeffson

Industries, Inc., came on trial before the Court and a

jury, the Honorable Elmo B. Hunter, District Judge, pre-

siding, and the issues having been duly tried and the jury

having duly rendered its verdict, and the Court entered

its findings.

IT IS ORDERED AND ADJUDGED

That the plaintiff, Jeffson Industries, Inc., under

Count I of its complaint recover of the defendant the sum

of Fifty-Two Thousand Dollars ($52,000.00) which is

trebled pursuant to the provisions of 15 U.S. C. Section 15

for a total of One Hundred Fifty-six Thousand Dollars

($156,000.00), with interest thereon at the rate of 6 percent

as provided by law from this date and attorney’s fees

in the amount of $54,300.00 and the costs of this action.

Repent eRRE es eres one = 2s ee

B. 2

Dated at Kansas City, Missouri, this 17th day of

March, 1975.

/s/Elmo B. Hunter

Judge

In the United States District Court for the Western

District of Missouri, Western Division

NO. 19,978-4

JAMES E. NORTHERN and SHIRLEY NORTHERN,

Plaintiffs,

BETTY SOPER and JEFFSON INDUSTRIES, INC.,

Intervenors,

vs.

McGRAW-EDISON COMPANY,

Defendant.

JUDGMENT

This action by Betty Soper under Counts I, II and

III of her complaint came on for trial before the Court

and a jury, the Honorable Elmo B. Hunter, District Judge,

presiding, and the issues having been duly ‘ried, the jury

having duly rendered its verdict, and the Court entered

its findings

IT IS ORDERED AND ADJUDGED

That the plaintiff, Betty Soper, under Count I of her

complaint recover of the defendant, McGraw-Edison Com-

pany, Inc., the sum of Ten Thousand Dollars ($10,000.00),

which is trebled pursuant to the provisions of 15 U.S.C.

B. 3

Section 15 for a total of Thirty Thousand Dollars

($30,000.00) with interest thereon at the rate of 6 percent

as provided by law, from this date and that Betty Soper

further recover the sum of $36,200.00 as attorney’s fees

under Count I of her complaint, pursuant to the provisions

of 15 U.S.C., Section 15 and her costs of this action.

IT IS FURTHER ORDERED AND ADJUDGED

That the plaintiff Betty Soper recover of the defend-

ant, MceGraw-Edison Company, Inc., the sum of Eight

Thousand Dollars ($8,000.00) with interest thereon at the

rate of 6 percent as provided by law from this date under

Count II of her complaint and her costs of this action.

IT IS ORDERED AND ADJUDGED

That the plaintiff Betty Soper under Count III of

her complaint recover of the defendant, McGraw-Edison

Company, Inc., the sum of One Hundred Thousand Dollars

($100,000.00) with interest thereon at the rate of 6 percent

as provided by law from this date and her costs of that

action.

Dated at Kansas City, Missouri, this 17th day of

March, 1975.

/s/Elmo B. Hunter

Judge

(Filed March 17, 1975.)

ee ee)

ee re

B. 4

In the United States District Court for the Western

District of Missouri, Western Division

NO. 19,978-4

JAMES E. NORTHERN and SHIRLEY NORTHERN,

; Plaintiff s,

BETTY SOPER and JEFFSON INDUSTRIES, INC.,

Intervenors,

vs.

McGRAW-EDISON COMPANY,

Defendant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

ON ISSUES SUBMITTED FOR DETERMINATION

BY THE COURT

Prior to the jury trial in this cause, and prior to the

giving of the Court’s instructions to the jury at the close

of all evidence and argument, it was agreed by counsel

for all parties to this litigation that certain questions of

fact and law would be decided by the Court and that a

jury determination of these questions would be waived by

plaintiffs, intervenors, and defendant.

The questions agreed to be submitted for Court deter-

mination are: (1) Whether the defendant possessed suffi-

cient economie power with respect to the “Arnold Palmer’?

trademark and right to use the “Arnold Palmer” name

to appreciably restrain free competition in the market

for drycleaning equipment, fixtures, furnishings, signs, and

B. 5

backdrops; and (2) Whether a not insubstantial amount

of interstate trade and commerce was affected.

Prior to submitting this cause to the jury, the Court

made its preliminary determination that intervenors Betty

Soper and Jeffson Industries had established sufficient

economic power and a not insubstantial amount of inter-

state commerce affected so that the remaining issues on

the antitrust claims of those intervenors were submitted

for jury determination under the Court’s instructions as

to the law. On the evidence received, including testimony,

depositions, answers to interrogatories, stipulations, and

evidence directed to the Court out of the presence of

the jury, the Court makes the following findings of fact

and conclusions of law on the issues submitted for Court

determination.

This Court has jurisdiction as to Count I of the com-

plaint of Betty Soper and Count I of the complaint of

Jeffson Industries, Incorporated under the provisions of

Title 28 United States Code, Section 1337 as those claims

arise under Section 1 of the Sherman Act (15 U.S.C.,

See. 1) and Section 4 of the Clayton Act (15 U.S. C., See.

15). This Court has jurisdiction as to the claims of James

E. Northern and Shirley Northern in Counts II and ITT

of their complaint and as to Counts II and III of the

complaint of Betty Soper under the doctrine of pendent

jurisdiction. United Mine Workers v. Gibbs, 383 U. S.

715, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1966).

The registered trademark of Arnold Palmer including

the use of the Arnold Palmer name, which was utilized

by Arnold Palmer Cleaning Center Sales Division of de-

fendant MeGraw-Edison Company possessed sufficient

B. 6

economic power or market control from its desirability

to consumers and from the uniqueness in its attributes

to force buyers of Arnold Palmer Cleaning Center fran-

chises, including plaintiff (intervenor) Jeffson Industries,

as it applies to the purchase by Jeffson Industries of the

Arnold Palmer franchise store located at 95th and Blue

Ridge in Kansas City, Missouri and the Gladstone Arnold

Palmer franchise store located in Gladstone Shopping Cen-

ter in Gladstone, Missouri, and plaintiff (intervenor) Betty

Soper as it applies to the Arnold Palmer Cleaning Center

in Liberty, Missouri, to buy other items ineluding dry

cleaning equipment, fixtures, furniture and to lease signs

and backdrops from Arnold Palmer Cleaning Center Sales

Division of defendant MeGraw-Edison at prices which were

higher than those same or comparable items could have

heen obtained for on the open market from other sources.

Further, the Arnold Palmer Cleaning Center franchisees,

including plaintiff Jeffson Industries on the Blue Ridge

and Gladstone Arnold Palmer stores and Betty Soper on

the Liberty, Missouri Arnold Palmer store did purchase

the dry cleaning equipment, fixtures, furniture and lease

the signs and backdrops at higher prices than those items

er comparable items could have heen obtained for on the

open market because of their strong preference for defend-

ant’s unique and desirable registered trade name. See,

Northern Pacifie Ry. Co. v. United States, 356 U. 8. 7-

8, 78 S. Ct. 519, 2 L. Ed. 545 (1945); International Salt

Co. v. United States, 332 U. S. 392, 68 S. Ct. 12, 92 L. Ed.

20 (1947); United States v. Loew’s Ine., 371 U. S. 38, 83

S. Ct. 97, 9 L. Ed. 2d 11 (1962); Fortner Enterprises, Ine.

v. United States Steel Corp., 394 U. S. 495, 89 S. Ct.

1252, 22 L.. Ed. 2d 495 (1969); Siegel v. Chicken Delight,

Ine., 311 F. Supp. 847 (N. D. Cal. 1970).

B. 7

The total amount of interstate trade and commerce

in the sale of Arnold Palmer franchise stores by Arnold

Palmer Cleaning Center Sales Division of defendant, in-

cluding dry cleaning and laundry equipment, fixtures, fur-

niture, and leases of signs and backdrops, which were tied

to the defendant’s registered trademark was substantial

in terms of total dollar volume so as not to be merely

‘‘de minimis’’ and was sufficient in terms of total dollar

value to foreclose competition in the supplying of said

tied items from a substantial market. The total volume

of all Arnold Palmer Cleaning Center franchise stores

by defendant, including the sales of Arnold Palmer Clean-

ing Center franchise stores to Jeffson Industries at 95th

and Blue Ridge in Kansas City, Missouri and Gladstone,

Missouri and the Betty Soper Arnold Palmer Cleaning

Center franchise store in Liberty, Missouri have been con-

sidered, and the total dollar volume of all of said sales

by defendant of Arnold Palmer Cleaning Center franchise

stores over some 30 states of the United States cannot

be regarded as insubstantial. See Fortner Enterprises,

Ine. v. United States Steel Corp., 394 U. S. 495, 89 S. Ct.

1252, 22 L. Ed. 2d 495 (1969); International Salt Co. v.

United States, supra: Siegel v. Chicken Delight. Ine., su-

pra.

Accordingly, in view of these findings and conclusions,

judgment will enter in favor of intervenors Betty Soper

and Jeffson Industries on the claims in Count I of their

complaints.

/s/Elmo B. Hunter

United States District Judge

(Filed January 16, 1975)