Petition — J. Truett Payne Co. v. Chrysler Motors Corp.

‘Gupreme Court, U. & |

FILED

JUN 10 989

IN THE ‘nee.

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 19__.

J. TRUETT PAYNE COMPANY, INC.,

a corporation,

Petitioner

vs.

CHRYSLER MOTORS CORPORATION,

a corporation,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

Morris K. SIROTE

2222 Arlington Avenue, South P

Birmingham, Alabama 35205

(205) 933-7111

Counsel for Petitioner

Of Counsel:

SIROTE, PERMUTT, FRIEND, FRIEDMAN,

HEtp & APOLINsky, P.A.

2222 Arlington Avenue, South

Birmingham, Alabama 35205

(205) 933-7111

i

TABLE OF CONTENTS

Page

Fetition for Writ of Certnonet) ]

Ct TRI ks . ae

ERI, sapere neal caatrgi iam hice occa taaaanae 3

Gpeeeiions Pobented ... no es 3

See aeetetes VOI «3 eee 4

Statement of the Case ______ naeiin ascent ana toate aie 4

Basis for Federal Jurisdiction in the Trial Court __._. 9

Reasons for Granting the Writ 8

PATON ins cissisncnisitnaiponesincighbionrgapasaniccadeataemagaiataae 13

I. The Fact of Damage was Proved -_............--_- 13

Ri. Amount of Database 17

Pee RON EE RAVEN RBCS LEA MAR PE AN by ST 22

PRUE OC SECON Las intense 24

il

TABLE OF CASES

Page

Bruce’s Juices v. American Can Co.,

87 F. Supp. 985, 990 (S.D. Fla. 1949),

aff'd, 187 F.2d 919 (5th Cir.) , modified on

other grounds and rehearing denied, 190

F.2d 73 (5th Cir.) , cert. dismissed, 342

I RN adic eregcerrctsintepememnncnninannmnenm 10, 17, 18

American Motors Corp. v. F.T.C.,

384 F.2d 247 (6th Cir. 1967), cert. denied,

390 U.S. 1012 (1968) -........ 1]

Bargain Car Wash, Inc. v. Standard Oil Co.,

rae .ees (7 Cr. 1972) 11, 14

Bruce’s Juices v. American Can Co.,

eee. gor (8087) 10, 17, 19, 22

Brunswick Corp. v. Pueblo Bowl-O-Mat,

Ec fn ae 19

Chrysler Credit Corporation v. J. Truett Payne

Company, Inc. v. Chrysler Motors Corporation,

eee tien (oem Car. 1979) Tf Py

E. Edelmann & Co. v. F.T.C.,

239 F.2d 152 (7th Cir. 1956) —-.-- WDM at alee 11,15

Elizabeth Arden Sales Corp. v. Gus Blass Co.,

150 F.2d 988, 996 (8th Cir.) ,

een, eeened, S26 U.S. 778 (1945) ——_______. 10, 21

F.T.C. v. Morton Salt Co.,

a os, 49, 50 (1948) 11, 14, 15, 16, 22

Foremost Dairies, Inc. v. F.T.C.,

348 F.2d 674 (5th Cir. 1965) —-...----. 10, 11, 15, 16

Fowler Mfg. Co. v. Gorlick, 415 F.2d

1248 (ath Cir. 1969), cert. denied,

eee mae

Larry R. George Sales Co. v. Cool Attic Corp.,

oe eae aoe, e7e (oc Cir. 1979) 20

lil

TABLE OF CASES — (Continued)

Grace v. E. J. Kozin Co.,

BOG Ree. tee cee Gee, 197) 10, 21

Hanson v. Pittsburg Plate Glass Industries,

Inc., 482 F.2d 220, 227 (5th Cir. 1973),

cert. denied, 414 U.S. 1136 (1974) _1 19, 11, 16

Kestenbaum v. Falstaff Brewing Corp.,

514 F.2d 690, 694 (5th Cir. 1975),

cert. denied, 424 U.S. 9438 (1976)... 20

Perkins v. Standard Oil Company,

PO Sen RO pees 10, 11, 13, 14

Perma Life Mufflers, Inc. v. International

Parts Corp., 392 U.S. 134, 148 (1968) —.-... 11,14

Terrell v. Household Goods Carriers’ Bureau,

494 F.2d 16, 20 (5th Cir.), cert.

Gummeed, 419 US. S67 (1974) 20

Zenith Radio Corp. v. Hazeltine Research,

Inc., 395 U.S. 100, 125-124 (1969) 10, 11, 14

FEDERAL STATUTES INVOLVED

BE PW cc a 4,9

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 19...

J. TRUETT PAYNE COMPANY, INC.,

a corporation,

Petitioner

VS.

CHRYSLER MOTORS CORPORATION,

a corporation,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS,

FIFTH CIRCUIT

Petitioner respectfully prays that a Writ of Certiorari

issue to review the final order of the United States Court

of Appeals, Fifth Circuit, 607 F.2d 1133 (5th Cir. 1979),

entered on December 7, 1979, which reversed the judgment

of the district court for the Northern District of Alabama

awarding to J. Truett Payne Company, Inc. the sum of

Three Hundred Seventy-Three Thousand Seven Hundred

Forty-I'wo and 44/100 D. ‘ars ($373,742.44) for a viola-

tion of the Robinson-Patma.: Act in the following entitled

case:

CHRYSLER CREDIT

CORPORATION,

a corporation, Plaintiff

Vv.

PANY, INC., Third Party Plaintiff -

Appellee

Vv.

CHRYSLER MOTORS

CORPORATION

)

)

)

)

)

)

J. TRUETT PAYNE COM.- _) Defendant,

)

)

)

)

) Third Party Defendant,

) Additional Party

) Defendant, Appellant

NO. 77-2331

On Appeal from the United States District Court for

the Northern District of Alabama, Southern Division

In addition, Petitioner respectfully prays a Writ of

Certiorari issue to review that final order of the United

States Court of Appeals, Fifth Circuit, on to-wit, March

18, 1980, which overruled and denied Petitioner's Petition

for Rehearing, or in the Alternative Rehearing En Banc.

| OPINION BELOW

The opinion of the United States Court of Appeals, Fifth

Circuit is reported in Chrysler Credit Corporation v. J.

Truett Payne Company, Inc. v. Chrysler Motors Corpora-

tion, 607 F.2d 1133 (5th Cir. 1979). That opinion sought

to be reviewed is also contained in the Appendix, pg. 1.

The order overruling and denying a Petition for Rehear-

ing, or in the Alternative Rehearing En Banc, was entered

3

on March 18, 1980, and is set forth at Appendix, pg. 7. The

Appendix is separately presented from this Petition.

JURISDICTION

The opinion of the United States Court of Appeals, Fifth

Circuit, reversing the trial court’s judgment in this case was

entered on December 7, 1979. Petitioner's Application for

Rehearing, or in the Alternative Rehearing En Banc was

denied on to-wit, March 18, 1980. The jurisdiction of this

Court is invoked under 28 U.S.C. § 1254 (1). This Petition

was filed within ninety days of the Fifth Circuit’s order de-

nying a rehearing.

QUESTIONS PRESENTED

1. Does the court’s requirement that the disfavored au-

tomobile dealer must affirmatively show actual lost sales to

favored competitors as the only means of proving damage,

rather than permitting the jury’s appropriate inference of

damage to stand, impose an inflated standard of proof un-

der the Robinson-Patman Act thereby effectively prevent-

ing enforcement of the Act by private attorneys general?

2. In a market where keen competition exists between

competing retail automobile dealers, does an automobile

manufacturer's substantial price discrimination, totaling

$81,248.94, against one of its dealers during a three and

one-half year period, permit an inference of actual damage

to the disfavored dealer so that a jury’s verdict finding such

damage should be sustained?

3. Does the same standard of proof regarding damage in

a “public injury” Robinson-Patman Act case apply in this

“private” Robinson-Patman Act case?

4. When there is both an inference of damage and direct

proof of damage to the disfavored retail automobile dealer

4

as a result of the automobile manufacturer's price discrimi-

nations, is it permissible for the jury to award damages to

the disfavored dealer at least in the amount “indicated’”’ by

the sum of the price discrimination?

THE STATUTES INVOLVED

The pertinent provisions of the Robinson-Patman Act,

15 U.S.C. § 13, a copy of which in full is set forth at Ap-

pendix, pg. 28, is set forth below:

°%

It shall be unlawful for any person engaged in com-

merce, where such commodities are sold for use, con-

sumption, or resale within the United States or any

Territory thereof or the District of Columbia or in-

sular possession or other place under the jurisdiction

of the United States, and where the effect of such dis-

crimination may be substantially to lessen competition

or tend to create a monopoly in any line of commerce,

or to injure or destroy or prevent competition with any

person who either grants knowingly or receives the

benefit of such discrimination or the customers of

either of them... .

In addition, 15 U.S.C. § 15 states as follows:

Any person who shall be injured in his business or

property by reason of anything forbidden in the anti-

trust laws may sue therefore in any district court of the

United States in the district in which the defendant

resides or is found or has an agent, without respect to

the main controversy and shall recover three-fold the

damages by him sustained, and the cost of suit includ-

ing a reasonable attorney's fee.

STATEMENT OF THE CASE

This price discrimination case was tried in the United

States District Court for the Northern District of Alabama,

5

Southern Division, before the Honorable Judge Seybourn

Lynne sitting with a jury. The jury returned a verdict of

$111,247.48 against Chrysler Motors Corporation, which

was trebled and an attorney’s fee added. Judgment against

Chrysler Motors Corporation was entered in the amount of

$373,742.44. Chrysler’s Motion for judgment notwithstand-

ing the verdict or for a new trial was denied by Judge

Lynne. .

The evidence in that trial showed as follows:

J. Truett Payne Company (hereinafter ‘‘Payne’’) had

been a Chrysler-Plymouth retail automobile dealer in Bir-

mingham, Alabama, since approximately 1944 (Tr. 40).

During a three and one-half year period from January 1971

until Payne was forced out of business in May 1974, Payne

competed with three other Chrysler-Plymouth dealers in a

market of exceedingly tough competition in Birmingham-

Jefferson County, Alabama. Customers shopping for new

cars compared Payne’s prices with each of the other three

Chrysler-Plymouth dealers competing with Payne (Tr. 46,

124). Chrysler Motors Corporation (hereinafter “Chrys-

ler”) had been paying rebates to Payne and the other com-

peting dealers on various cars they purchased from Chrysler

since the early 1960s. These rebates were paid under the

terms of rebate or incentive programs which Chrysler for-

mulated during that period. For the last five years of its

operation, Payne lost money each year. During the time

frame with which this law suit is concerned, Chrysler cre-

ated approximately sixteen rebate or incentive programs,

each lasting several months, under which it made payments

to the four competing Chrysler-Plymouth dealers in the Bir-

mingham-Jefferson County, Alabama market area. Chrysler

1Those competing Chrysler dealers were Roebuck Chrysler-Plymouth,

Central Motors, and Bessemer Chrysler-Plymouth (which was later changed

in 1972 to Vestavia Chrysler-Plymouth) .

6

unilaterally assigned each dealer a separate and different

quota for wholesale purchases and/or retail sales which each

had to satisfy in order to obtain the rebate payments. The

rebate payments Chrysler made to a dealer on a particular

car under all of the rebate programs reduced the price of

that new car purchased from Chrysler by the dealer and had

an effect on and influenced the price charged the customer

by a dealer (Tr. 56, 62).

In almost every program, Chrysler signed Payne a higher

quota than its competing dealers and Payne had to meet

that higher quota in order to receive the rebate payment.

In other words, Payne had to either sell more new cars or

purchase more new cars from Chrysler in order to obtain a

rebate payment from Chrysler on those new cars. Com-

pared to the other dealers, Payne actually paid much more

for each car in almost every rebate program and had a total

discrimination of $81,248.94. As a result of the high quotas

assigned Payne and the rebates paid by Chrysler to the other

qualifying dealers, Payne lost sales because it was at a trade

disadvantage with those competing dealers (Tr. 69).

The rebates paid on a particular car by Chrysler reduced

Chrysler’s price charged the dealer on that car. (Tr. 256,

617-618). Payne’s lost sales reduced its cash flow so that

Chrysler Credit Corporation withdrew its floor plan credit

line to Payne, forcing Payne to close down (Tr. 68-69).

These rebate programs were one of the causes that put

Payne out of business (Tr. 100). Because of the rebate

programs, Payne ended up forcing business in order to

make a sale and was losing some customers and sales (Tr.

65-67; 91-92; 94-95; 126-127). In order to make a sale of a

new car, Payne had to over-allow on the used car traded in

by the customer (Tr. 55, 711-712). Payne had to sell at a

smaller profit than it could afford to sell in order to com-

pete effectively, and generally it did not meet the lower

7

prices of the other dealers. (Tr. 91; 124). The rebate pro-

grams and the payments made by Chrysler to the various

dealers affected the price at which the cars were offered to

the public because the rebate effectively lowered the cost to

the dealer per unit per car (Tr. 125).

Dr. George Ignatin, an economist at the University of

Alabama, testified that the rebates paid by Chrysler per car

under those rebate programs reduced each dealer’s cost of

that car which had been purchased from Chrysler (Tr.

265). Dr. Ignatin is thoroughly familiar with the car mar-

ket in Birmingham and did several studies about the Bir-

mingha:n market (Tr. 201; 695). Chrysler’s rebate pro-

grams reduced competition in Birmingham market between

Chrysler dealers and had an adverse effect on competition

(Tr. 222). Asa result of the rebate payments to the com-

peting dealers, Payne could not compete as well with the

other dealers because it got less of a price reduction on the

cars (Tr. 203). It is well known in the industry that all

dealers discount off list price in setting the retail price of

a car to consumers. Because of these rebate payments, Payne

could not discount its cars from list price as much as it could

if it had received the same rebate per car as the other deal-

ers competing with Payne at that time; and the other com-

peting dealers therefore did not have to discount their price

on new cars as much as they otherwise would have done had

Payne received an equal rebate per car from Chrysler. ‘The

ultimate effect of the Chrysler rebate programs was to in-

crease the retail price to a consumer (Tr. 202-204; 205).

The price discrimination caused by the rebate programs

was one of the causes of Payne’s going out of business (TT.

100; 706) .2 Without those price discriminations, Payne

2In its opinion on December 7, 1979, the Fifth Circuit stated that Dr.

Ignatin prefaced his testimony on the issue of the rebate programs causing

Payne to go out of business by stating that “I really can’t tell you without

having you know — it’s a hypothetical question.” Actually, this statement

¢%

8

could probably have made a profit and stayed in business.

Dr. Ignatin reviewed and analyzed each of the rebate pro-

grams and showed for each program how much more money

each competing dealer received on a per car basis than did

Payne under that same program. The payments for each

program were made by Chrysler only on the type or model

car described in program rules. In almost every instance,

different amounts were paid to each dealer on each particu-

lar model for which a dealer qualified during a period of

the program’s duration. Dr. Ignatin’s analysis of those pro-

grams compared the monies received by Payne with the

monies received by the other favored dealers, and showed

the actual monetary difference that each dealer received on

a per car basis during each program® during that three and

was not made by Dr. Ignatin with respect to the issue of whether or not

the rebate programs caused Payne to go out of business. Dr. Ignatin made

that statement with respect to whether or not, in his opinion, a company

like Chrysler could devise an incentive program that paid a dealer monies

based on that dealer’s strength and potential compared to other dealers.

See Tr. 705-706. That statement by Dr. Ignatin had nothing whatsoever

to do with his opinion that the rebate programs, as applied to Payne, were,

in fact, discriminatory and caused Payne to go out of business.

8In order to not be tedious, each individual program will not be an-

alyzed in this statement of facts. However, in order to show the Court an

example of the type of rebate program involved, we will analyze the first

program known as “Winter Winners” which ran for a period of two and

one-half months during 1971. Chrysler assigned Payne a wholesale pur-

chase quota of ninety-nine (99) new cars which must have been purchased

from Chrysler by Payne in order to receive rebate payments on new cars

that Payne sold to customers. The rebate payments would be made by

Chrysler to Payne and the other dealers on the retail sales made by each

dealer, thereby reducing the cost to each dealer of that particular car sold.

Chrysler assigned Central Motors a wholesale purchase quota of sixty-three

(63) units, Roebuck Chrysler-Plymouth only fifty-four (54) units, and Bes-

semer only thirty-nine (39) units. In that program Payne did not qualify

for any rebate payments because it could not meet its wholesale purchase

quota. All the other competing dealers did qualify and received rebates

on every car they sold at retail, in amounts ranging from $30 to $60 per

model. During that period when the program was in effect, Payne would

have received a total of Five Thousand Two Hundred Eighty Dollars

($5,280.00) ir price reductions on the various new cars that it sold if it

9

one-half year period. The total amount of price discrimina-

tion against Payne during this period was $81,248.94 (Tr.

191). Of the sixteen programs analyzed, only three were

non-discriminatory to Payne. Two of these programs did

not have different purchase or sales quotas established for

the various dealers, but had identical quotas. Only in one

rebate program where different quotas were established for

each dealer was Payne not disfavored. Payne did not claim

any damages resulting to it from those three programs. (See

the “Stock Eliminator” program “Chrysler-Plymouth Early

Clean Up Bonus,” and “C-Body Bonus” at Tr. 158, 178,

184, 186).

BASIS FOR FEDERAL JURISDICTION

IN THE TRIAL COURT

This case was brought in the trial court under the Robin-

son-Patman Act, 15 U.S.C. § 13 and under § 4 of the Clay-

ton Act, 15 U.S.C. § 15, which permit a suit in the United

States District Court by any person who shall be injured in

his business or property as a result of anything forbidden in

the anti-trust laws, specifically the Robinson-Patman Act.

REASONS FOR GRANTING THE WRIT

The decision below severely undermines private plain-

tiffs’ rights to enforce the Robinson-Patman Act since that

had received the same rebate per car sold that the other dealers did in fact

receive from Chrysler at that time. This Five Thousand Two Hundred

Eighty Dollar ($5,280.00) figure was the total price discrimination during

that program.

Charts showing the rebate payments to each dealer under all rebate pro-

grams, the resulting reduction in unit cost from Chrysler to each dealer

and the total price discrimination to Payne for each program are attached

to the Appendix, pp. 10-27. These charts represent Dr. Ignatin’s analysis

of the Chrysler rebates and their effect of price discrimination on Payne.

Each chart was introduced as an exhibit in the trial. The abbreviations on

each chart are explained in the introduction to the Appendix.

10

decision imposes an unwarranted standard of damage proof

requiring proof of actual lost sales and profits as the only

means of proving damage to the plaintiff's business. ‘The

Fifth Circuit's opinion conflicts with the following decisions

of the United States Supreme Court and other circuit courts

of appeal which have held that a jury is entitled to infer in-

jury to the plaintiff when the plaintiff has been disfavored

by substantial price discriminations in a market of keen

competition: Perkins v. Standard Oil Company, 395 U.S.

642 (1969); Zenith Radio Corp. v. Hazeltine Research,

Inc., 395 U.S. 100, 124 (1969) ; F.T.C. v. Morton Salt Co.,

334 U.S. 37 (1948) ; Hanson v. Pittsburg Plate Glass Indus-

tries, Inc., 482 F.2d 220 (5th Cir. 1973) , cert. denied, 414

U.S. 1136; Bruce’s Juices v. American Can Co., 87 F. Supp.

985 (S.D. Fla. 1949), aff'd, 187 F.2d 919 (5th Cir.) , modi-

fied on other grounds and rehearing denied, 190 F.2d 73

(5th Cir.) , cert. dismissed, 342 U.S. 875 (1951) ; Foremost

Dairies, Inc. v. F.T.C., 348 F.2d 674 (5th Cir. 1965).

The decision below should be reviewed because it erro-

neously interprets and fails to apply to the facts in this case

the governing principles of the Robinson-Patman Act. In

addition to those cases cited above, the decision below was

contrary to a decision of this Court and three decisions of

other United States Courts of Appeal which have held that,

once illegal price discrimination is proved, the plaintiff is

entitled to recover damages equal, at least, t the amount

that the plaintiff was charged illegal discriminatory higher

prices: Bruce’s Juices v. American Can Co., 330 U.S. 743

(1947) ; Grace v. E. J. Kozin Co., 538 F.2d 170 (7th Cir.

1976) ; Fowler Mfg. Co. v. Gorlick, 415 F.2d 1248 (9th Cir.

1969) , cert. denied, 396 U.S. 1012 (1970) ; Elizabeth Arden

Sales Corp. v. Gus Blass Co., 150 F.2d 988, 996 (8th Cir.) ,

cert. denied, 326 U.S. 773 (1945). Those cases held that

damages should be awarded in the minimum amount of

11

the illegal discriminatory prices which obviously dimin-

ished the profits of the disfavored purchaser and helped to

destroy its financial ability to withstand competition from

the more favored competitors. ‘The court below, in the in-

stant case, although admitting that there was some prece-

dential support for permitting damages in the amount in-

dicated by the sum of the price discrimination, failed to

follow those precedents.

There was more than ample evidence, as set forth in the

statement of facts in this Petition, that showed damage to

Payne’s business. ‘The market in which Payne competed

was one of exceedingly tough competition where customers

compared the prices of the various competing automobile

dealers. The amount of price discrimination on the various

automobiles on which Chrysler reduced the price to Payne’s

competitors was substantial, sometimes as much as $300 per

car.* Since the price discriminations were substantial, com-

pared to the dealer’s profit on a typical sale, and Payne's

business showed losses during the relevant time frame

which were not attributable to causes other than the price

discrimination, the case law is clear that damage to Payne's

business should be inferred. F.T.C. v. Morton Salt Co.,

supra., at 50; American Motors Corp. v. F.T.C., 384 F.2d

247 (6th Cir. 1967), cert. denied, 390 U.S. 1012 (1968) ;

Perkins v. Standard Oil Co., supra.; Hanson v. Pittsburg

Plate Glass Industries, Inc., supra. at 227; Zenith Radio

Corp. v. Hazeltine Research, Inc., supra.; Perma Life Muf-

flers, Inc. v. International Parts Corp., 392 US. 134, 148

(1968) ; Bargain Car Wash, Inc. v. Standard Oil Co. (Ind.) ,

466 F.2d 1163 (7th Cir. 1972); Foremost Dairies, Inc. v.

F.T.C., supra.; E. Edelmann & Covv. F.T.C., 239 F.2d 152

(7th Cir. 1956).

4See for example plaintiff's“exhibit 52, attached to the Appendix at

page 25. Pa

rd

oa

12

The Fifth Circuit refused to apply the principles of the

above cited cases in this instance because, according to the

court, there cannot be an inference of damage in a private

case unless there is proof of actual lost sales. Such reasoning

imposes on the plaintiff the almost impossible burden of

“proving a negative”, i.e. that pla-atiff may only recover if

it can prove no sale, and hence no profits, because a favored

dealer used its anticipated favorable price discrimination to

lower the retail price for the car to the consumer. Actually,

this reasoning overlooks the crucial fact that Payne was re-

ducing its sale’s price and over-allowing on its used car

trade-ins in order to maintain its sales. Thus, there might

not have been a substantial loss of sales that could be shown

by statistical evidence; but there could have been a substan-

tial loss (for instance on the sale of used cars) and a lessen-

ing of Payne’s capital position and ability to compete

against its competitors. These latter facts were proved, as

well as the fact that the price discrimination was one of the

factors causing Payne to go out of business. See, e.g. Tr. 97-

100, 706; See also, Tr. 539, 593-599 where Chrysler’s own

witness claims that Payne lost money on its used car opera-

tions causing it to go out of business.

This case, therefore, is of nationwide importance in de-

termining whether the principles of law under Morton Salt

and its descendants are still applicable in a private anti-trust

case. In addition to the question involving the Morton Salt

principles of law, the admitted split among the circuits on

whether damages can be at least the amount of the illegal

price discrimination should impel the Court to grant the

Writ of Certiorari to the Fifth Circuit Court of Appeals.

13

ARGUMENT

I. The Fact Of Damage Was Proved.

In Perkins v. Standard Oil Company, supra, the Court

specifically held that if there is any evidence in the record

to support an inference of causation, the ultimate conclu-

sion as to what the evidence proves is for the jury’s de-

termination. (Jd. at 648). The jury in the instant case

concluded that Chrysler’s rebate programs caused damage

to Payne. Payne more than met the burden of showing just

an inference of damage; it proved by direct evidence the

fact of damage. The following items of proof were pre-

sented to the jury showing that there was, in fact, damage

~aused by the anti-trust violations of Chrysler’s rebate pro-

grams:

(1) Dr. George Ignatin testified that Payne would not

have gone out of business had it not been for the price dis-

crimination to it in the rebate programs. (Tr. 706). The

going concern value of Payne at that time was $170,000

(Tr. 210-218).

(2) Dr. George Ignatin testified that the Chrysler rebate

programs had caused, in fact, an injury to competition by

making consumers pay a slightly higher price for cars be-

cause Payne’s competitors did not have to reduce their

prices below list price quite as far as they would otherwise

have done had Payne not been charged a higher price.

Payne’s competitors were able to get better profits by virtue

of being sold the cars by Chrysler at a lower price and being

able to reduce the price to the consumer easier than Payne.

(Tr. 203-204) . This hurt Payne’s ability to compete in this

tough market (Tr. 202-203) , eventually being a cause of its

demise.

(3) Mr. J. Truett Payne, President and chief operating

officer of his company, testified that in selling new cars,

14

Payne had to “over-allow” on the used car trade-ins in

order to obtain business and Payne also had to reduce the

gross profit margin on the new cars sold in order to obtain

the new car sales. (Tr. 65-67, 91-92, 94-95, 126-127). He

also testified that the rebate programs were one of the causes

of Payne going out of business (Tr. 68-69, 100) .

(4) Because of this ‘‘over-allowing” on trade-ins, Payne

lost money on its used car operations (Tr. 97-100, 539,

593-599) which caused the line of credit extended by

Chrysler Credit Corporation to be withdrawn. This less-

ened Payne’s capital position and weakened its ability to

compete in a market of very keen competition with other

Chrysler-Plymouth dealers.

There was evidence of keen competition in the market

(Tr. 44-46, 124) and large rebate payments by Chrysler to

Payne’s competitors on the various programs, sometimes as

much as $300 per car. (See for example the analysis of the

“Super Earnings” rebate program which shows the results

of the rebate payments to the various dealers under that

program, Appendix p. 25). Such evidence is enough by

itself for a jury to infer damage under the Morton Salt and

Hanson cases. Therefore, it is clear that there was substan-

tial evidence in the record to permit the jury to find, as it

did, causation of actual injury to Payne’s business by the

Chrysler rebate programs. At the very least, the jury could

have found an inference of injury to Payne’s business where

the market was one of keen competition and the price dif-

ferentials on the cars were substantial. Numerous cases

hold it is the jury’s prerogative to infer damage from the

price discrimination in such a situation. Perkins v. Stan-

dard Oil Co., supra; Zenith Radio Corp. v. Hazeltine Re-

search, Inc., supra at 124; Perma Life Mufflers, Inc. v.

International Parts Corp., supra at 143; F.T.C. v. Morton

Salt Company, supra at 49; Bargain Car Wash, Inc. v. Stan-

15

dard Oil Co., 466 F.2d 1163 (7th Cir. 1972); Foremost

Dairies, Inc. v. F.T.C., 348 F.2d 674 (5th Cir. 1965); E.

Edelmann & Co. v. F.T.C., 239 F.2d 152 (7th Cir. 1956) .

The Fifth Circuit mentioned that Payne’s share of the re-

tail market in Birmingham does not show a substantial re-

duction which could be attributable to the price discrimi-

nation, therefore, showing a loss of customers. However,

Payne’s testimony was to the effect that in order to keep

business, it had to over-allow on trade-ins and reduce its

gross profit in the sale of new cars. Therefore, Payne's

share of the new car market might not have diminished

substantially. What was diminished was Payne’s profits and

Payne’s ability to compete in the market place, so much so

that it was caused to go out of business.

The Fifth Circuit states that Payne misapplies the hold-

ing of F.T.C. v. Morton Salt Co., 334 U.S. 37 (1948), be-

cause inference of damage in a public case from the “‘sub-

stantial price difference’ does not necessarily show inference

of damage in a private case. Having indicated some doubts

as to viability of Morton Salt, the court said that mere proof

of substantial price difference is not sufficient to show the

fact of damage.

The Supreme Court, in Morton Salt stated the test appli-

cable to both public and private cases:

... the competitive opportunities of certain merchants

were injured when they had to pay [seller] substan-

tially more for their goods than their competitors had

to pay.

(334 U.S. at 46-47) :

In addition, this Court held that a merchant compelled to

pay a higher price would actually be injured competitively.

(Id. at 48)

16

Contrary to the Fifth Circuit’s opinion, it has previously

accepted as recently as 1973 the viability of the principle

that damage is inferred from price differentials, as set out

so clearly in Morton Salt. In Hanson v. Pittsburg Plate

Glass Industries, Inc., supra at 227, the court stated:

Nevertheless competitive injury may be inferred when

one set of customers buys at substantially lower prices

than other customers. Federal Trade Comm’n v. Mor-

ton Salt Co..... (emphasis added)

That the favored dealers during each rebate program got

substantially lower prices than Payne cannot be denied.

True, the payment from Chrysler usually came after a

dealer made a wholesale purchase or retail sale; but that

payment nonetheless reduced the cost of the new car to the

dealer. Therefore, Morton Salt is directly applicable to

show not only competitive injury, but damage to the non-

favored purchaser. To otherwise argue would clearly be

unrealistic because when one business can obtain its inven-

tory at a lower price than another competitor, it matters

not whether the favored business uses its lesser cost to re-

duce the ultimate price to the consumer or pockets the dif-

ference to weather the uncertainties of competition and the

economy. The net result will always be, as it was in the

case involving Payne, that the price discriminations have a

significant impact on the vigor and health of the non-

favored business, injure its competitive opportunities, and

cause it damage in actual fact. Actual lost sales may or may

not also be the effect of the discrimination.

Additionally, the Fifth Circuit in Foremost Dairies, Inc.

v. F.T.C., supra at 680, held that “an inference of injury

may be properly indulged” where the price discrimination,

even though not reflected in the retail sales price, if reflect-

ed in the sales price would have affected the consumer de-

cision to purchase. As previously mentioned, the rebates

17

sometimes were as high as $300 per car. Clearly, a price dif-

ference of $300 on a consumer’s single most important pur-

chase of personal property is more than ample to affect the

consumer's decision to purchase. Therefore, Payne is not

merely relying, as the court implied in its opinion, on a

price difference. Rather Payne is relying on testimony of

(1) the adverse effect that the price differences had on com-

petition (2) on Payne’s ability to compete being reduced

considerably in the tough market (3) on the large price dif-

ferentials (4) on the fact that Payne had to over-allow on

used cars and reduce his gross profit on new car sales be-

cause of its competitors receiving cars at less cost (5) on the

fact that Payne lost money, and (6) on the fact that the

rebate programs were one of the causes of its going out of

business. It could be said that Payne was selling more, but

enjoying it [profits] less.

II. Amount Of Damage

There is substantial case law, some cited by the Fifth Cir-

cuit in its opinion in this case, supporting the rule that in

a market of keen competition the amount of the illegal price

differential will be the minimum damage to the non-

favored purchaser. However, the Fifth Circuit failed to

even cite or follow two cases directly in point: Bruce's

Juices v. American Can Co., 330 U.S. 743, 757 (1947) and

Bruce’s Juices v. American Can Co., 87 F. Supp. 985, aff'd.,

187 F.2d 919 (5th Cir.), modified on other grounds and

rehearing denied, 190 F.2d 73 (5th Cir.) , cert. dismissed,

342 U.S. 875 (1951).

The Supreme Court has held in Bruce’s Juices v. Ameri-

can Can Co., 330 U.S. 743, 757, that the amount of the dam-

ages are at least the amount of price discrimination:

For despite petitioner's plaint on the difficulty of

proving damages, it would establish its right to recover

18

three times the discriminatory difference without prov-

ing more than the illegality of the prices. If the prices

are illegally discriminatory, the petitioner has been

damaged, in the absence of extraordinary circum-

stances, at least in the amount of that discrimination.

(emphasis added)

The district court in Bruce’s Juices v. American Can Co.,

supra, stated emphatically on remand:

This discrimination in favor of the plaintiff's above-

named competitors was manifestly harmful to plain-

tiff’s business, for the reason that the cost of juice cans

represented a large percentage of the total cost of this

citrus product, and the discriminatory higher price

paid by plaintiff for [its cans] diminished its Peer

and helped destroy its financial ability to withstand

competition. (emphasis added)

(87 F. Supp. at 990)

The Fifth Circuit affirmed the district court’s decision at

187 F.2d 919.

As any retail seller knows, if his competitor obtains the

product from the manufacturer at a cheaper price, it will

certainly be to that competitor’s advantage in the market-

place, making it easier for that competitor to draw custom-

ers away from the disfavored retail seller and to withstand

the fluctuations of spirited competition, It does not matter

whether or not the competitor uses the price difference to

lower the price of the product, to award as an incentive to

his salesmen to do a better job in selling customers, to hire

an advertising agency to draw customers to the favored com-

petitor, or for extra profit. The end result of using the

favored price difference will always be that the favored

competitor will enhance his capital position and be better

able to compete in the marketplace at the expense of the

disfavored seller. The disfavored seller will suffer by losing

customers or dropping out of business in the lean years and

19

weak markets, while the favored competitor has become

strong enough to survive during weak market with periods

of losses. Such is the instant case where Payne was forced

out of business not so much by lost sales, but by a weaker

capital position and continuing losses created by Chrysler’s

price discrimination.

In the instant case, evidence was presented to the jury

that Payne’s ability to compete and withstand the competi-

tive forces in the market was drastically lowered by virtue

of the price discrimination in the rebates paid by Chrysler

to Payne’s competitors. (Tr. 65-67, 203). The amount of

the price differential favoring Payne’s competitors on their

purchase of new automobiles was $81,248.94, a substantial

amount of money by any company’s standards. ‘This Court,

at the very least, should adopt the rule, previously adopted

by it in Bruce’s Juices v. American Can Co., supra, which

permits the plaintiff to recover damages for illegal price dis-

crimination at least in the amount of the price differential.

The precepts of the Supreme Court’s Brunswick Corp. v.

Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977), referred to

the opinion of the Fifth Circuit, do not prohibit Payne

from recovering damages for the price differential. To the

contrary, the Brunswick Corp. case, if applicable at all, sup-

ports Payne. In that case, the Court held that the plaintiffs

were not damaged in their business by reason of the defen-

dant’s acquisition of failing companies in violation of Sec-

tion 7 of the Clayton Act. The plaintiffs there had claimed

that, were it not for the prohibited acquisition, they would

have obtained more business through the customers of the

failing companies after those companies had failed. When

the defendant acquired those companies, the business did

not go to the plaintiffs. ‘The court held that anti-trust laws

provided a damage remedy for losses directly resulting from

the violation of the antitrust laws and not for every single

20

violation if there was not the proximate cause connection.

The loss of future additional customers was so remote that

it was not a loss contemplated as being “‘caused”’ by the vio-

lation of the Clayton Act. For all practical purposes, the

Brunswick case was a proximate cause case, holding that the

damages claimed by plaintiffs were too far removed and not

caused by the antitrust violation.

In the instant case, it is clear that the rebate programs

directly caused Payne two separate categories of damage re-

dressable under the Robinson-Patman Act: (1) reduction

of profits on current sales, i.e., loss of profits by over-allow-

ing on used cars and selling retail at lower prices in order

to retain business, and (2) the going concern value of

Payne's business which the rebate programs caused to fail.

The going concern value of Payne was approximately

$170,000. (Tr. 210-218). Clearly, the above injury to

Payne is exactly the type of loss and damage that the

Robinson-Patman Act was designed to compensate.

Courts have held in numerous cases that, after showing

an injury to the business resulting from the violation of

antitrust laws, all that plaintiff must do is show ‘‘some indi-

cation of the amount of the damage done.’* Larry R.

George Sales Co. v. Cool Attic Corp., 587 F.2d 266, 270

(5th Cir, 1979) ; Kestenbaum v. Falstaff Brewing Corp., 514

F.2d 690, 694 (5th Cir. 1975), cert. denied, 424 U.S. 943

(1976) ; Terrell v. Household Goods Carriers’ Bureau, 494

F.2d 16, 20 (5th Cir.) , cert. dismissed, 419 U.S. 987 (1974) .

Payne clearly showed substantial evidence that it had been

damaged by virtue of Chrysler’s rebate programs favoring

Payne’s competitors. Therefore, one “indication” of the

amount of damage would be the price differential.

5In the Fifth Circuit's opinion in this case, the court erroneously set a

higher standard of proof by saying that the plaintiff must show “at least

the approximate amount of the damage”. That higher standard is not ap-

propriate in this case.

21

The trial court charged the jury that the amount of the

price differential could be considered by it in determining

the amount of any damage that it might find Payne suf-

fered, but that amount was not automatically the amount

of any damage. (Tr. 806-807). The Fifth Circuit held that

there was not substantial evidence proving actual damage

to Payne. If this Court feels that the damages for the loss

of Payne’s business—that is the going concern value—might

be too speculative, at the very least this Court should not

permit the Fifth Circuit's reversal to stand since it prohibits

a new trial on the issue of the amount of damages. This

Court, at the very minimum, should permit a new trial on

the issue of damages so that the jury could consider the

price differential and determine what damages, if any, to

award.

If this Court adheres to the Fifth Circuit opinion and re-

jects the price differential damage cases cited in that opin-

ion,® the Court would destroy antitrust plaintiffs’ abilities

to enforce the anti-trust laws. In effect, this Court would

be requiring that Payne prove by direct evidence (as op-

posed to inferential evidence) a negative, i.e. that Payne

lost sales and the amounts of those lost sales. This burden

is not appropriate in this type of case where a disfavored

seller strives to retain sales by reducing its profits and over-

allowing on the trade-ins. Payne’s injury to its business is

just as severe in this case where no lost sales may be shown,

but a continuing loss in profits is caused by the illegal price

discrimination,

6In its opinion, the Fifth Circuit cited numerous cases supporting what

it called the “Robinson-Patman automatic damages concept.” However,

the court stated that it declined to follow that rule, although admitting

there was substantial precedential support. See, Fowler Manufacturing Co.

v. Gorlick, 415 F.2d 1248 (9th Cir. 1969), cert. denied, 396 U.S. 1012

(1970) ; Elizabeth Arden Sales Corp. v. Gus Blass Co., 150 F.2d 988, 996

(8th Cir.), cert. denied, 326 U.S. 773 (1945); Grace v. E. J. Kozin Co.,

538 F.2d 170 (7th Cir. 1976) .

22

CONCLUSION

The issues presented here are substantial and of nation-

wide importance. The Fifth Circuit’s opinion has effective-

ly undermined the application of the damage rule in one of

the most important anti-trust decisions that this Court has

ever rendered, F.T.C. v. Morton Salt Co., supra. If allowed

to stand, the Fifth Circuit’s decision will dramatically affect

the ability of private anti-trust plaintiffs to redress legiti-

mate grievances.

Not only has the Fifth Circuit misapplied the law with

respect to the fact of damage, but it refuses to accept the

Supreme Court’s decision in Bruce’s Juices v. American

Can Co., supra, and other circuit court decisions permitting,

at a minimum, an award of damages to the disfavored pur-

chaser in the amount of the illegal price discrimination.

The very nature of the Robinson-Patman Act, prohibiting

price discriminations, would make its enforcement a hollow

and empty shell if a plaintiff were required to prove spe-

cific lost sales and specific lost profits resulting from the

price discrimination. It would be almost impossible to

prove a negative, i.e, that the disfavored purchaser lost a

specific sale because its more favored competitor used a

price discrimination to reduce the sales price to the cus-

tomer. Actually, that favored competitor might use the

price discrimination to enhance its capital position to with-

stand losses which inevitably occur to dealers during weaker

markets. ‘Therefore, once the fact of damage is proved from

substantial price discrimination, the most effective way of

insuring enforcement of the Robinson-Patman Act is to per-

mit damage awards in the amount, at least, of the price dif-

ferential.

In the instant case Payne not only proved the fact of dam-

age and showed the substantial amounts of price discrimi-

23

nation, but it also proved that the price discrimination was

one of the causes that put it out of business. In such case,

Payne is entitled to at least the amount of the price discrimi-

nation; and if not overly speculative, it is also entitled to

the jury's award of its going concern value above and be-

yond the amount of the price discrimination. Both of these

elements of damage were ignored by the Fifth Circuit's

opinion reversing the District Court.

For the reasons set forth above, it is respectfully sub-

mitted that this Petition for Writ of Certiorari should be

granted.

Respectfully submitted,

SIROTE, PERMUTT, FRIEND, FRIEDMAN,

Hevtp & APOoLINsky, P.A.

J

Morris K. Sirote, Attorney for

J. Truett Payne Company, Inc.,

Petitioner

2222 Arlington Avenue South

P. O. Box 3364-A

Birmingham, Alabama 35205

[205] 933-7111

24

PROOF OF SERVICE

I, Morris K, Sirote, attorney for J. Truett Payne Com-

pany, Inc., a corporation, Petitioner herein, and a member

of the Bar of the Supreme Court of the United States, do

hereby certify that on the hc day of pril, 1980, I served

copies of the above and foregoing Petition for Writ of —

Certiorari to the Supreme Court of the United States, to-

gether with appendices thereto, by mailing and depositing

same in the United States Post Office or mail box, with first

class postage prepaid, in a duly addressed envelope, to Hon.

J. Fredric Ingram and Hon. J. Ross Forman, III, 1600 Bank

for Savings Building, Birmingham, Alabama 35203, attor-

neys for Chrysler Motors Corporation, a corporation.

It is further certified that all parties required to be served

have been a

This the 7” day Pn

Morkis K. Sirote |

Attorney for J. Truett Payne

Company, Inc., Petitioner

2222 Arlington Avenue, South

Birmingham, Alabama 35205

(205) 933-7111