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

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Text

FILED

yur 26 1982

52-212

CLERK

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1981

NO.

J. TRUETT PAYNE COMPANY, INC.,

a corporation,

Petitioner

CHRYSLER MOTORS CORPORATION,

a corporation,

Respondent

APPENDIX

TO PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

ELEVENTH CIRCUIT

C. Lez REEVEs

2222 Arlington Avenue South

Birmingham, Alabama 35205

(205) 933-7111

Counsel for Petitioner

Of Counsel:

Smrore, Permutt, Frienp, FrreEpMAN,

Hetp & Apo.insky, P.A.

2222 Arlington Avenue South

Birmingham, Alabama 35205

(205) 933-7111

ia. Ur

Abbreviations eereereeee evn eevee eeeeeeeeeeeeererree iii

Chrysler Credit Corp. v. J. Truett Payne Co.,

Inc., 670 F.2d 575 (Sth Cir.

, 1982) see ere eeeeeeeeeeeeeeeeeeereeereeeeeere 1

Rehearing Denied in J. Truett Payne Co.,

Inc. v. sler Motors Corp.,

677 F.24 117 (1982) (en banc) .......+--- 10

J. Truett Payne Co., Inc. v. Chrysler

Motors Corp., 451 U.S. 557 (1981) ...... ll

Chrysler Credit Corp. v. J. Truett Payne

Co., Inc., 607 F.2d 1133 (5th Cir.

1980) eeee eee ee eee eee eee eee eeeee eee eee 25

Denial of —— of J. Truett Payne,

; oi F. F.2a 12 8 6 yet 34-35

Plaintiff's Exhibit 37 ....csecccceeccweseeces 36

Plaintiff's Exhibit 38 .......cceececeeneeeees 37

Plaintiff's Exhibit 39 ......ccsecceceeceeeees 38

Plaintiff's Exhibit 40 2... ccccccecccccnevces 39

Plaintiff's Exhibit 41 .....sceecccncecseeeeee 40

Plaintiff's Exhibit 42 2... scecccecccenecees 41

Plaintiff's Exhibit 43 ....csccsccccccweeseees 42

Plaintiff's Exhibit 44 .....ceecccccccececees 43

Plaintiff's Exhibit 45 2... cccccceccewecees 44

Plaintiff's Exhibit 46 eeneeeeeeeveeeeereeeeeeee 45

Plaintiff's Exhibit 47 eeeeeeeeereeeeereeeeeer eee 46

OA OCR ge

TABLE OF CONTENTS (CONT'D) —=—-

— onto Bn

Plaintiff's Exhibit 48 .....-..++seseeeeeeerenes

Plaintiff's Exhibit 49 ...........ceeeeeeeeeeees

Plaintiff's Exhibit 50 .....00....0..cceeceeeses

Plaintiff's Exhibit 51 .........-.ccecceeeeeuees

Plaintiff's Exhibit 52 ........0..eceeeeeeeeeees

Plaintiff's Exhibit 53 ........sceeecsesescecess

Plaintiff's Exhibit 54 ..........-ceceeeeceesees

' Defendant's Exhibit 31 ..........-seseceeeeecees

1 U.s.C. § 13 seer eeeeeeeeeeeeeeeeeereeeeee

Section 4 of the Clayton Act, 15 U.S.C.

§ 15 ere ee ee eee eee e eee eee eee ee een eee ee rer eee

WPRTITITI Tt 58-142; 215-217

George Ignatin «2... sec ccenccccceceteeneenes 143-213; 214-215

ih? See lee is. =

The abbreviation used throughout

the Chart:s, pages 10 throuch 27, are set

forth below:

C/L - Car Line

CEN. - Central Motors

Diff. and

Difference- Price Differential to J. Truett

Payne

El. - Eligible

JTP - J. Truett Payne

Obj. - Objective

P.0. - Per Unit

Pur. - Purchase

Reb. - Rebate

ROE. - Roebuck Chrysler-Plymouth

VEST. - Vestavia Chrysler-Plymouth

wW/S - Wholesale

- iii -

CHRYSLER CREDIT CORP v. J. TRUETT PAYNE CO. INC. S75

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to recover treble damages under Section 4

1979); Kestenbeum v. Falstaff Brewing

Corp., 514 F.2d 690, 694 (Sth Cir. 1975), cert

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petition for rehearing en banc, the Court of

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- 16 <-

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J. TRUETT PAYNE CO. v. CHRYSLER MOTORS CORP. 557

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PAS- AQ 3034 AF 30

J. TRUETT PAYNE .CO,, INC, », CHRYSLER MOTORS

gots.’ Som :

CERTIORARI TO THE UNITED STATZS COURT OF APPEALS FOR THE

FIFTH CIRCUIT

No. 79-1944. Argued January 21, 1981—Decided May 1S, 1981

Petitioner, a former automobile dealer, brought suit. against respondent

automobile manufacturer in Federal District Court, al that re-

spondent's “sles incentive” eneeeate 195 2. violated the

price-discrimination prohibition of §2(a) of the Gaye Act, as

amended hy the Robinson-Patman Act. Under its programs, respondent

petied as hen to ats dealers if thes exceeded their quotasset. by re-

spumlent for cavh dealer—of ears to be sold at retail or purchased from

respondent. l'etitioner alleged that respondent set petitioner's quotas

higher than those of its competitors; that to the extent it failed to meet

its quotas, and to the extent its competitors met their lower quotas,

petitioner reecived fewer bonuses; and that the net effect was that it ~

paid more for its automobiles than did its. competitors. Petitioner

contended that the amount of the price discrimination—the amount of

the price difference multiplied by the number of petitioner’s purchases—

was $81,248, and that when petitioner went out of business, the going-

concern value of the business ranged between $50,000 and $170,000.

Respondent muintained that the sales incentive programs were nondis-

eriminatory, and that they did not injure petitioner or adversely

sfect competition The jury returned a verdict awarding petitioner

Stttcts iN om damage . whieh the Detriet Court trebled, ‘The Court

ot Appeals reversed, holding that it was unnecessary to consider whether

a violution ot $2 (a) had been proved, since petitioner had failed to

introduce substantial evidence of injury attributable to the programs,

much less substantial evidence of the amount of such injury, as was

required in order to recover treble damages under § 4 of the Clayton

Act.

Held:

1. Petitioner's contention that once it has proved a price discrimina-

tion in violation of §2 (a) it is entitled at a minimum to so-called

“automatic damages” in the amount of the price diserimination is with-

out merit. Section 2 (a), a prophylactic statute which is violated

merely upon « showing that “the effect of such discrimination may be

substantially to lessen competition,” does not require, for purposes of

= *

i = 3

OCTOBER TERM, (980

Syilabus 451 0.5.

injunctive actions, that the dixerimination mast in fact have hecmed

competition. Corn Products Co. +. FTC, 324 U. 8. 726; FTC v. Morton

Salt Ca,, 324 U.S. 37. Towever. under $4 of the Clavtan Act. whieh

is essentially a remeslial statnte providing treble damages to ony pemon

“who shail be injured in his bueiness or property by reason of anything

forbidden in the antitrast laws.” « plaintiff must make some showing of

actual injury attributable to something antitrust Inwe were designed

to prevent. Thus it must prove more than a violation of $2 (a), since

such proof establishes only that injury may result. Cf. Brunswick

Corp. v. Pueblo Bow!-0-Mat. Inc., 429 U8. 477. Pp. 561-568.

2. The rule exensing ontitrust plaintiff: from oan wedlaly rigorous

standard of proving antitrust injury, «ee, +. @.. Zenith Radia Corp, v.

Haseltine Research, Tne., 305 UT. S100, will not be applied here to

determine whether petitioner, though net entitled te “antomatic com

ages,” has produced cuough evidence of vetual mimry te stein revo ery

While ot clese cee tion whether petityener . evedemoe would he

sufficient to support a jury award even under such mie. a more funda-

mental difficulty is that the cases relied upon by petitioner ail depend

in greater or lesser part on the inequity of 1 wrongdoer defeating the

recovery of damages against him by insisting upon a rigorous standard

of proof. In this case, it cannot be said with assurance that respondent

is a “wrongdoer” since the Court of Appeals went directly to the issue

of damages aiter bypassing the question whether respondent in fact

violated §2 (a). The proper course is to remand the case so that the

Court of Appeals may pass upon respondent's contention that the

evidence was insufficient to support a finding of such violation. If the

court determines that respondent did violate the Act, it should then

consider the sufficiency of petitioner's evidence of injurv. Pp. 563-568.

607 F. 2d 1133, vacated and remanded.

Rennouiet, J., delivered the opinion of the Court. in whieh Bonusn,

C. J., and Stewart, Ware, and =revens, JJ., joined. Powers, J., filed

an opinion dissenting in part, in which Baewnan, Mansnaty. and

Brackmun, JJ., joined, post. p. 569.

C. Lee Reeves argued the cause and filed briefs for petitioner.

J. Ross Forman III argued the cause and filed a brief for

respondent.”

"Robert H. Whaley filed a brief for Ricky Masbrowk ct al, as amici

curiae urging reversal.

Briefs of amici curiae were filed by Thomas E. Deacy, J/r., E. Houston

- 12 -

Stes!

aa — OS Ce ie le a ee _—e - oT eel 2 Ds el de

J. TRUETT PAYNE CO. ». CHRYSLER MOTORS CORP. 559

537 Opinion of the Court

Justice Rennoquist delivered the opinion of the Court.

The question presented in this case is the appropriate meas-

ure of damages in a suit brought under § 2 (a) of the Clayton

Act, a8 amended by the Robinson-Patman Act."

Petitioner, for several decades a Chrysler-Plymouth dealer

in Birmingham, Ala., went out of beasiness in 1974. It sub-

sequently brought suit against respondent in the United

States District Court for the Northern District of Alabama,

alleging that from January 1970 to May 1974 respondent’s

various “sales incentive” programs violated $2/a). Under

one type af program, respondent assigned to each partiecipat-

ing dealer a soles objective aud patd to the dealer a bonus on

eacii car sold in excess of that objective. Under another type

of program, respondent required each dealer to purchase from

it a certain quota of automobiles before it would pay a bonus

on the sale of automobiles sold at retail. The amount of the

Harsha, and Alan 1. Becker, for Cessna Aireraft Co.; and by John T.

Cusack and Gordon B. Nash, Jr., ior Vanco Beverage, Inc.

+ Section 2(a) of the Clayton Act, 38 Stat. 730, as amended by the

Robinson-Patman Act, 49 Stat. 1526, 15 U. 8. C. $13 (a), provides in

pertinent part:

“Tt shall be unlawful for any person engaged in commerce, in the course

of seh commence, ctther ditecth of imdineethy, to disetiminate in price

between chloe: purchaser. ot camonstitie af like gree and qnality,

where evther or anv of the purchases invelyed in such diserimination ate

in comtmeres, where such commodities are seld for use, consumntion, or

resale within the United States . . . and where the effect of such diserim-

ination may be substantially to lessen competition or tend to create a

monopoly in any line of commerce, or to injure, destroy or prevent com-

petition with any person who cither grants or knowingly receives the

benefits of such dixerimination, or with customers of either of them ... .”

Section 4 of the Clayton \ct, 38 Stat. 731, 15 U_ 3. C. $15, provides:

“Any person who shall he injured in his business or property by reason

of anything forbidden im the antitrust laws may sue therefor in any dis-

trict court of the United States in the distriet in which the defendant re-

sides or is found or has an agent, without respect to the amount in con-

troversy, and shall recover three-fold the dameges by him sustained, and

the cost of suit, including a reasonable attorney's fee.”

ig 13 -

A ilies

560 OCTOBER TERM, 1980

Opinion of the Court 451 U.S.

bonus deperded on the wumber of retail sales (or wholesale

purchases) mace in excess of the dealer's objective. and could

amount to several hundred dollars. Respondent set peti-

tioner’s objectives higher than those of its competitors, requir-

ing it to sell (or purchase) more automobiles to obtain a

bonus than its competitors. To the extent petitioner failed

to meet those objectives and to the extent its competitors

met their lower objectives, petitioner received fewer bonuses.

The net effect of all this. according to petitioner, was that it

paid more money for its automobiles than cid its competitors.

It contended that the amount of the price discrimination—

the amount of the price difference multiplied by the num-

ber of petitioner's purchases--was S8U2IS. Ht alse claimed

that the going-concern value of the business as of May 1974

ranged between $50,000 and $170.000.

Respondent maintained that the sales incentive programs

were nondiscriminatory, and that they did not injure peti-

tioner or adversely affect competition. The District Court

denied respondent’s motion for a directed verdict. The jury

returned a verdict against respondent and awarded petitioner

$111,247.48 in damages, which the District Court trebled.

The Court of Appeals for the Fifth Circuit reversed with

instructions to dismiss the complaint. 607 F. 2d 1133 (1979).

It found that in order to recover treble damages under § 4

of the Clayton Act, a plaintiff must prove (1) « violation of

the antitrust laws, (2) cognizable injury attributable to the

violation. and (3) at least the approximate amount of dam-

age. It found it unnecessary to consider whether petitioner

proved that respondent’s incentive programs violated § 2 (a)

because, in its view. petitioner had “failed to introduce sub-

stantial evidence of injury attributable to the programs, much

less substantial evidence of the amount of such injury.” Jd.

at 1135. Rejecting petitioner's theory of “automatic dam-

ages,” under which mere proof of discrimination establishes

the fact and amount of injury, the court held that injury

must be proved by more than mere “(c]onclusory statements

- 44-

J. TRUETT PAYNE CO. r. CHRYSLER MOTORS CORP. 561

557 Opinion of the Court

by the plaintiff, without evidentiary support.” J/d., at 1136-

1137. The court concluded that the District Court erred in

refusing respondent’s motion for a directed verdict and in

denying its motion for judgment notwithstanding the ver-

diet. We granted certiorari, 449 U. S. 819 (1980), to review

the decision of the Court of Appeals.

Petitioner first contends that once it has proved a price

discrimination in violation of § 2 (a) it is entitled at a mini-

mum to so-called “automatic damages” in the amount of the

price discrimination. Petitioner concedes that in order to re-

cover damages it must establish cognizable injury attributa-

ble to an antitrust violation and some approximation of dam-

age. Brief for Petitioner 9. It insists, however, that the

jury should be permitted to infer the requisite injury and

damage from a showing of a substantial price discrimination.

Petitioner notes that this Court has consistently permitted

such injury to be inferred in injunctive actions brought to

enforce $2 (a), e. g., PTC v. Morton Salt Co., 334 U. 8. 37

(1948), and argues that private suits for damages under § 4

should be treated no differently. We disagree.’

By its terms § 2 (a) is a prophylactic statute which is vio-

lated merely upou a showing that “the effect of such dis-

crimination may be aubstantially to lessen competition.”

* The sutomatie<lamages theory has split the lower courts. The lead-

img caso approving the theory is Fowler Manufacturing Co. v. Gorlick,

415 F. 2d 1248 (CA® 1969), cert. denied, 396 U.S. 1012 (1970). See also

Co., 150 F. 2d 988 (CAS), cert.

1945) (involving §§2(d) and 2 (c) of the Act);

OCTOBER TERM, 1980

Opinion of the Court 451.8.

(Emphasis supplied.) As our cases have recognized. th

statute does not “require that the diseriminations must in

fact have harmed competition.” Corn Products Rejining Co.

v. FTC. 324 U. S. 726. 742 (1945): FTC v. Morton Salt Co..

supra, ut 46 (“the statute does wot rmanive the Commission

to find that injury has actually sesulted™). Section 4 of the

Clayton Act, in contrast, is essentially a remedial stawute.

It provides treble damages to “{a]ny person who shall be in-

jured in his business or property by reason of anything for-

bidden in the antitrust laws... .” (Emphasis supplied.)

To recover treble damages. then. a plaintiff must make some

showing of actual injury attributable to something the anti-

trust laws were designed to prevent. Perkins v. Standard Oil

Co., 395 U. S. 642, i485 (1969) (plaintiif “must, of course, be

able to show a causal connection between the price discrimina-

tion in violation of the Act and the injury suffered’). It

must prove more than a violation of § 2 (a), since such proof

establishes only that injury may result.

Our decision here is virtually governed by our reasoning

in Brunswick Corp. v. Pucblo Bowl-O-Mat, Inc., 429 U. 8.

477 (1977). There we rejected the contention that the mere

violation of §7 of the Clayton Act, which prohibits mergers

which may substantially lessen competition. gives rise to a

damages claim under $4. We explained that “to recover

damages [under § 4] respondents must prove more than that

the petitioner violated § 7. since such proof establishes ouly

that injury may result.” /d., at 486. Likewise in this case,

proof of a violation does not mean that a disfavored pur-

chaser has been actually “injured” within the meaning of § 4

The legislative history buttresses this view. Both the Pat-

man bill, H. R. 8442. §2(d), 74th Cong., Ist Sess. (1935),

as introduced in the House, and the Robinson bill. 8. 3154.

§$2(d), 74th Cong.. 2d Sess. (1935). as introduced in the

Senate. provided that a plaintiff's damages for a violation

of $2(a) shall be presumed to be the amount of the price

discrimination. The provision, however, encountered such

J. TRUETT PAYNE CO. v. CHRYSLER MOTORS CORP. 563

557 Opinion of the Court

strong opposition in both Houses that the House Committee

eliminated it from its bill. H. R. Rep. No. 2287, 74th Cong..

2d Sess.. 16 (1936), and the Senate Committee modified the

provision to wuthorize presumptive dameges in the amount of

the discrimination only when plaintiff shows the “fact of dam-

age.” S. Rep. No. 1502, 74th Cong., 2d Sess., $ (1936). The

Conference Committee eliminated even that compromise, and

§2(a) was passed in its present form. Congress thus has

rejected the very coneept which petitioner seeks to have the

Court juricially legislate. Gulf Oil Corp, vy. Copp Paving Co.,

419 U.S. 186, 19-201 (1974).*

Petitioner next contends that even though it may not be

entitled to “automatic damages” upon a showing of a viola-

tion of §2 (a), it produced enough evidence of actual injury

to survive a motion for a directed verdict. That evidence

consisted primarily of the testimony of petitioner’s owner,

Mr. Payne. and an expert witness, a professor of economics.

Payne testified that the price discrimination was one of the

causes of the dealership going out of business. In support

of that contention, he testified that his salesmen told him that

the dealership lost sales to its competitors and that its market

share of retail Cheysler-Mlymouth sales in the Birmingham

aren was Tho in ETO 2h > in beTt, Who in 172, and 25%

in 1973. Vayne contended that ic was proper to infer.

that the 4% drop in 1972 was a result of the incentive pro-

* Relying on Bruce's Juices, Inc. v. American Can Co., 330 U. S. 743,

757 (1947), petitioner argues that this Court has previously accepted

the automatic-damages theory. In that ease, the Court stated that if

petitioner can show an illegal price discrimination under the Act, “it

would establish its right to recover three times rhe diveriminatory ‘liffer-

ence without proving more than the illegality of the prices.” bid. But

that statetwent is merely dictum, sinee the only ixsue before the Court was

whether a violation of §2 (a) could be used as an affirmative defense to

void a contract.

~ 19

564 OCTOBER TERM, 1986

Opinion of the Court 451 U.S.

grams. He also testified that ‘he discrimination caused

him to “force” business so that he could meet his as-

signed quotas. That is, his desire to make a sale induced him

to “overallow” on trade-ins, thus reducing his profits on his

used car operation. App. 51-52. Payne adduced evidence

showing that his average gross profit on used car sales was

below that of his competitors, though that same evidence re-

vealed that his average gross profit on new sales was higher.

Id,, at 269.

Neither Payne nor petitioner's expert witness offered docu-

mentary evidence as to the effect of the discrimination on re-

tail prices. Although Payne asserted that his salesmen and

customers told him that the dealership was being wadersold,

id., at. 35-37, 92, 95, he admitted he did not know if his com-

petitors did in fact pass on their lower costs to their cus-

tomers. /d., at 44, 57. Petitioner's expert witness took a

somewhat different position. He believed that the discrim-

ination would ultimately caus» retail prices to be held at an

artificially high level since petitioner's competitors would not

reduce their retail prices as much as they would have done if

petitioner received an equal bonus from respondent. /d., at

103, 135. He also testified that petitioner was harmed by the

discrimination even if the favored purchasers did not lower

their retail prices, since petitioner in that case would make

leas money per car.* /d., at 139.

- 18 -

J. TRUETT PAYNE-CO ». CHRYSLER MOTORS CORP. 565

557 Opinion of the Court

Even construed most favorably to petitioner, the evidence

of injury is weak. Petitioner nevertheless asks us to con-

sider the sufficiency of its evidence in light of our traditional

rule excusing antitrust plaintiffs from an unduly rigorous

standard of proving antitrust injury. In Zenith Radio Corp.

v. Hazeltine Research, Inc., 395 U. S. 100, 123-124 (1969),

for example, the Court discussed at some length the fixing of

damages in a case involving market exclusion. We accepted

the proposition that damages could be awarded on the basis

of plaintiff's estimate of sales it could have made absent the

“(D]amage issues in these cases are rarely susceptible of

the kind of concrete, detailed proor of injury which is

available in other contexts. The Court has repeatedly

held that in the absence of more precise proof, the fact-

finder may ‘conclude as a matter of just and reasonable

inference from the proof of defendants’ wrongful acts

and their tendency to injure plaintiffs’ business, and

from the evidence of the decline in prices, profits and

values, not shown to be attributable to other causes,

“Tf by reason of the discrimination, the preferred producers have been

able to divert business that would otherwise have gone to the «sfavored

shipper, damage has resulted to the extent of the diverted profits. If

the effect of the discrimination has been to foree the shipper to sell at a

: resulted to the extent of the reduction.

}

fewer funds available with

566 OCTOBER TERM, 1980

Opinion of the Court 451 U.S,

that defendants’ wrongful acts had caused damage to

the plaintiffs.’ Bigelow v. RKO Pictures. Inc., supra, at

264. See also Eastman Kodak Co. v. Southern Photo

Materials Co., 273 U. S. 359, 377-379 (1927); Story

Parchment Co. v. Paterson Parchment Paper Co., 282

U. S. 555, 561-566 (1931).” bid.

In Bigelow v. RKO Radio Pictures, Inc., 327 U. S. 251

(1946), relied on in Zenith, film distributors had conspired to

deny the plaintiff theater access to first-run films. The jury

awarded damages based on a comparison of plaintiff’s actual

profits with the contemporaneous profits of a competing the-

ater with access to first-run films. DPluintiff had also adduced

evidence comparing his actual profits during the conspiracy

with*liis profits when he had been able to obtain first-runs.

The lower court thought the evidence too imprecise to sup-

port the award, but we reversed because the evidence was

sufficient to support a “just and reasonable inference” of dam-

age. We explained:

“(A]ny other rule would enable the wrongdoer to profit

by his wrongdoing at the expense of his victim. It

would be an inducement to meke wrongdoing so effective

and complete in every case as to preclude any recovery,

by rendering the measure of damages uncertain. Failure

to apply it would mean that the more grievous the wrong

done, the less likelihood there would be of a recovery.”

327 U. S., at 264-265.

Our willingness to accept a degree of uncertainty in these

cases rests in part on the difficulty of ascertaining business

damages as compared, for example, to damages resulting from

& personal injury or from condemnation of a parcel of land.

The vagaries of the marketplace usually deny us sure knowl-

edge of what plaintiff’s situation would have oeen in the ab-

sence of the defendant’s antitrust violation. But our willing-

ness also rests on the principle articulated in cases such as

Bigelow, that it does not “ ‘come with very good grace’” for

J. TRUETT PAYNE CO. ». CHRYSLER MOTORS CORP. 567

557 Opinio. of the Court

the wrongdoer to insist upon specific and certain proof of the

injury which it has itself inflicted. Hetzel v. Baltimore &

Ohio R. Co., 169 U. S. 26, 39 (1898) (quoting United States

Trust Co. v. O’Brien, 143 N. Y. 284, 289 (1894). Accord,

Story Parchment Co. v. Paterson Parchment Paper Co., 282

U. S. 555, 563 (1931) (“Where the tort itself is of such a na-

ture as to preclude the ascertainment of the amount of dam-

ages with certainty, it would be a perversion of fundamental

principles of justice to deny all relief to the injured person,

and thereby relieve the wrongdoer from making any amend

for his acts”); Hastman Kodak Co. v. Southern Photo Mate-

rials Co., 273 TT, S, 359, 379 (1927).

Applying the foregoing principles to this case is not with-

out difficulty. In the first place, it is a close question whether

petitioner’s evidence ‘vould be sufficient to support a jury

award even under our relaxed damages rules.. In those cases

where we have found sufficient evidence to permit a jury to

infer antitrust injury and approximate the amount of damages,

the evidence was more substantial than the evidence presented

here. In Zenith, for example, plaintiff compared its sales in

Canada, where it was subject to a violation, with its sales in

the United States, where it was not. And in Bigelow, plain-

tiff adduced evidence not only comparing its profita with a

competitor not subject to the violation but also comparing its

protits during the time of the violation with the period imme-

diately preceding the violation.*

* Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555

(1931), is similarly distinguishable. In upholding a jury veriict against

respondents for a violation of § 2 of the Sherman Act, the Court observed:

BD adem ng sey a Hig hny Sugryegmbiayse cat on

568 OCTOBER TERM, 1980

Opinion of the Court 451 U.S,

But a more fundamental difficulty confronts us in this case.

The cases relied upon by petitioner all depend in greater or

lesser part on the inequity of a wrongdoer defeating the recov-

ery of damages against him by insisting upon a rigorous

standard of proof. In this case, however, we cannot say with

assurance that respondent is a “wrongdoer.” Because the

court below bypassed the issue of liability and went directly

to the issue of damages, we simply do not have the benefit of

its views as to whether respondent in fact violated § 2 (a).

Absent such a finding, we decline to apply to this case the

lenient damages rules of our previous cases. Had the court

below. found a violation, we could more confidently consider

the adequacy of petitioner's evidence.

Accordingly, we think the proper course is to remand the

case s¢° that the Court of Appeals may pass upon respond-

ent’s contention that the evidence adduced at trial was in-

sufficient to support a finding of violation of the Robinson-

Patman Act. We do not ordinarily address for the first time

in this Court an issue which the Court of Appeals has not

addressed, and we think this would be a poor case in which

to depart from that practice. If the court determines on

remand that respondent did violate the Act, the court should

then_consider the sufficiency of petitioner’s evidence of in-

jury in light of the cases discussed above. We, of course;

intimate no views as to how that issue should be decided.

We emphasize that even if there has been a violation of the

Robinson-Patman Act, petitioner is not excused from its bur-

den of proving antitrust injury and damages. It is simply

that once a violation has been established, that burden is to

some extent lightened.

of the wrong, not to those damages which are definitely attributable to the

wrong and only uncertain in respect of their amount... .” /d., at 562.

“If the damage is certain, the fact that its extent is uncertain does not

prevent a recovery.” /d., at 566.

In this case, by contrast, the issue is not so much the amount of damages

as whether petitioner has in fact been injured by an antitrust violation.

‘

J. TRUETT PAYNE CO. +. CHRYSLER MOTORS CORP. 569

557 Powstt, J., dissenting in part

For the foregoing reasons, the judgment of the Court of

Appeals is vacated, and the case is remanded for proceedings

consistent with this opinion.

It is so ordered.

Justice Powett, with whom Justice Brennan, JusTICcE

MarsHauu, and Justice Buackmuwn join, dissenting in part.

I concur in Part I of the Court’s opinion, but simply would

affirm the judgment of the Court of Appeals.

The Court of Appeals concluded that petitioner “failed to

introduce substantial evidence of injury attributable to [re-

spondent’s program], much less substantial evidence of the

amount of such injury.” 607 PB. 2d 1133, 1135. In Part IT

of its opinion, the Court today reviews the evidence, vacates

the judgment of the Court of Appeals, and remands the case

for a resifting of the evidence and determination of whether

respondent violated the Clayton Act as amended by the

Robinson-Patman Act. The Court identifies no error of fact

or law in the judgment of the Court of Appeals, but vacates

that judgment only because the Court finds it “unclear”

whether there is sufficient evidence. I find no basis for this

Court undertaking to second-guess the Court of Appeals as

to the sufficiency of evidence.

Even if there were some satisfactory reason for us to re.

view the evidence in this relatively mneomplicated case, I

think the Court of Appeals was plainly correet in finding

petitioner's evidence insuflicient to show a compctitive in-

jury of the kind that the antitrust laws were enacted to pre-

vent. See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429

U. 8. 477, 488-489 (1977). Section 2(a) is a prophylactic

statute that makes unlawful price discrimination that

“may .. . lessen competition.” Thus, a court cannot infer

from the fact of a violation that defendant’s behavior has

caused plaintiff any injury. A plaintiff must show, to recover

damages for violation of § 2 (a), that unlawful discrimination

in price allowed a favored competitor to draw sales or profits

—

570 OCTOBER TERM, 1980

Powett, J., dissenting in part 451 U.S.

from him. the unfavored competitor. See Enterprise [ndus-

tries, Inc. v. Texas Co., 240 F. 2d 457. 458 (CA2). evort. denied.

353 U.S. 965 (1957). Petitioner's evidence. which the Court

concedes to he “weak.” ante. at 565. amounts to nothing more

than a showing that its market share declined temporarily

4% in 1972. Petitioner presented no substantial evidence

that respondent’s incentive program caused its market share

to shrink. Indeed, over the 4-year period of the challenged

programs its market share increased 1%. Rather. petitioner

relied on its president’s canclusory testimony, which con-

sisted in major part of hearsay statements from petitioner's

automobile salesmen. Hypothetical analysis of the “pre-

dicted effects” of respondent's program by an economics pro-

fessor also was relied upon by petitioner to prove the actual

cause of injury. One hardly would expect this Court to reject

a Court of Appeals judgment that evidence as flimsy as this

was insufficient to go to the jury.

My concern with the Court’s opinion, however, goes be-

yond its reviewing the evidence. I have understood that in

a Robinson-Patman Act case the plaintiff has the burden of

proving the fact of antitrust injury by a preponderance of the

evidence. See Perkins v. Standard Oil Co., 395 U. S. 642,

648 (1969). Only when this fact has been proved may a

court properly be lenient in the evidence it requires to prove

the amount of damages. See Story Parchment Co. v. Pater-

son Parchment Paper Co., 282 U. S. 555. 562 (1931). It is

not at all apparent that the Court adequately recognizes this

Tt seems to me that today’s remand measurably increases

the uncertainty inherent in the generalities of the Robinson-

Patman Act. Accordingly, I dissent.

CHRYSLER CREDIT CORPORATION, a

corporation, Plaintiff,

J. TRUETT PAYNE, INC., etc., et al.,

Defendants-Third Party

Plaintiffs-Appellees,

CHRYSLER MOTORS CORPORATION, a

corporation, Third Party Defendant-Ad-

ditional Party Defendant-Appellant.

No. 77-2331.

United States Court of Appeals,

Fifth Circuit.

Dec. 7, 1979.

Rehearing and Rehearing En Banc

Denied Jan. 18, 1980.

Appeal from the United States District Court for the

Northern District of Alabama.

Before GODBOLD, RONEY and FRANK M. JOHN-

SON, Jr., Circuit Judges.

FRANK M. JOHNSON, Jr., Circuit Judge:

This is an appeal from a treble damages judgment

awarded against Chrysler Motors Corporation for price dis-

crimination in violation of section 2 (a) of the Clayton Act,

as amended by the Robinson-Patman Act.’

1Section 2(a) of the Clayton Act, as amended by the Robinson-Patman

Act, 15 U.S.C. § 13 (a), provides in part as follows:

“It shall be unlawful for any person engaged in commerce, in the

course of such commerce, either directly or indirectly, to discriminate in

quality . . . where the effect of such discrimination may be substantially

From January 1970 through August 1974, the period at

.. issue, Chrysler Motors was a wholly owned subsidiary of

Chrysler Corporation, engaged in wholesaling Chrysler-

Plymouth automobiles to retail dealerships throughout the

country. J. Truett Payne, Inc., was one of four such dealer-

ships in the Birmingham, Alabama, area.

Payne went out of business in May 1974. In September

1974, Chrysler Credit Corporation filed suit for the recov-

ery of certain unrepaid loans. Part of Payne's response was

the filing of this price discrimination claim against Chrys-

ler Motors.

Payne alleged that as a result of certain discriminatory

sales incentive programs conducted by Chrysler Motors

among its dealerships in the Birmingham area, Payne had

been forced to pay higher prices for Chrysler automobiles

than had its competitors. Payne claimed that because of the

higher prices it lost sales and profits, and was eventually

forced out of business. Payne sought treble damages under

section 4 of the Clayton Act.”

In defense, Chrysler Motors maintained that the sales in-

centive programs were available on a non-discriminatory

basis to all Chrysler dealerships in the Birmingham area,

including Payne, and denied that they had had an adverse

effect on competition or that they had injured Payne.

The district judge severed trial of this Chrysler Motors

issue from trial of the Choysler Credit issues. Testimony

%Section 4 of the Clayton Act, 15 U.S.C. § 15, provides as follows:

“Any person who shall be injured in his business or property by

was taken for six days. Chrysler's motions for a directed

verdict made at the close of Payne's case and at the close of

all the evidence were denied. The jury reached a verdict

and award against Chrysler of $111,247.48 (Payne had

asked for $180,000), wisich the court trebled. Chrysler's

motion for judgment notwithstanding the verdict or for a

[1] It is well established that in order to recover treble

damages under section 4 of the Clayton Act, a plaintiff

must prove (1) a violation of the antitrust laws, (2) cog-

nizable injury attributable to the violation, and (3) at least

the approximate amount of the damage. 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, 96

S.Ct. 1412, 47 L.Ed.2d 349 (1976); Terrell v. Household

Goods Carriers’ Bureau, 494 F.2d 16, 20 (5th Cir.) , cert.

dismissed, 419 U.S. 987, 95 S.Ct. 246, 42 L.Ed.2d 260

(1974) .

[2] We find it unnecessary to consider whether Payne

proved that the Chrysler incentive programs violated the

Robinson-Patman Act. Because Payne failed to introduce

substantial evidence of injury attributable to the programs,

much less substantial evidence of the amount of such in-

jury, the district court erred in refusing Chrysler's motions

for directed verdict and in denying Chrysler's motion for

judgment notwithstanding the verdict.

I. Cognizable Injury

To show that Chrysler's incentive programs caused it to

lose sales, Payne introduced the unsupported testimony of

J. Truett Payne, its owner, that customers and salesmen had

told him that the dealership was being undersold, and that

some salesmen had quit as a result. Payne also introduced

Ri |

evidence showing that its share of retail Chrysler-Plymouth

sales in the Birmingham area was 24% in 1970, 27% in

1971, 28% in 1972, and 25% in 1973. Payne contends that

it was proper to infer that the 4% drop in 1972 was a re-

sult of the incentive program.’

To show lost profits by reason of the programs, Payne

introduced only the unsupported testimony of Mr. Payne

that he was forced to lower prices in order to meet compe-

tition and that for the same reason the dealership had to,

or possibly had to, give greater allowances on used-car

trade-ins.

In an effort to show that the programs forced the dealer-

ship out of business, Payne relied on merely conclusory

statements to that effect by Mr. Payne and an expert

witness.*

[3,4] Under Boeing Co. v. Shipman, 411 F.2d 365, 373-

77 (5th Cir. 1969) (en banc) (standard for directed ver-

dict and judgment notwithstanding the verdict) , this show-

ing was clearly not such as to allow the case to go to the

jury. In an antitrust action, as noted above, the plaintiff

must show that the defendant's conduct materially contrib-

uted to his injury. Zenith Radio Corp. v. Hazeltine Re-

search, Inc., 395 U.S. 100, 114 n.9, 89 S.Ct. 1562, 23 L.Ed.

2d 129 (1969). He must do so “as a matter of fact and with

a fair degree of certainty.” Terrell v. Household Goods

Carriers’ Bureau, supra, 494 F.2d at 20. Conclusory state-

ments by the plaintiff, without evidentiary support, as to

the fact of damage caused by the alleged antitrust violation

*Payne also contends that the 2% incresse in 1973 was the result of a

1973 revision of the incentive programs that resulted in sales quotas more

are not sufficient. Evidence of a slight decrease in market

share roughly coincident with the alleged violation is not

sufficient either.* The plaintiff must put forth substantial

evidence. If he fails to do so, the defendant is entitled to a

directed verdict. See, ¢. g., Comfort-Trane Air Condition-

ing Co. v. Trane Co., 592 F.2d 1373, 1383 (5th Cir. 1979) ;

Yoder Brothers, Inc. v. California-Florida Plant Corp., 537

F.2d 1347, 1371 (5th Cir. 1976), cert. denied, 429 U.S.

1094, 97 S.Ct. 1108, 51 L.Ed.2d 540 (1977); Foremost-

McKesson v. Instrumentation Laboratory, 527 F.2d 417,

418-20 (5th Cir. 1976); Shumate & Co. v. National Ass'n

of Securities Dealers, Inc., 509 F.2d 147, 153 (5th Cir.),

cert. denied, 423 U.S. 868, 96 S.Ct. 131, 46 L.Ed.2d 97

(1975) .

[5,6] Payne maintains on this appeal that in a section

2(a) case mere proof of the alleged price discrimination is

sufficient to establish injury by reason of an antitrust viola-

tion entitling the plaintiff to damages. This Robinson-Pat-

man “automatic damages’ concept, as it has come to be

facturing Co. v. Gorlick, 415 F.2d 1248 (9th Cir. 1969),

cert. denied, 396 U.S. 1012, 90 S.Ct. 571, 24 L.Ed.2d 503

(1970) ; Elizabeth Arden Sales Corp. v. Gus Blass Co., 150

F.2d 988, 996 (8th Cir.), cert. denied, $26 U.S. 773, 66

S.Ct. 231, 90 L.Ed. 467 (1945). But we decline to follow

it. As the Supreme Court ruled in Brunswick Corp. v.

Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 439, 97 S.Ct. 690,

50 L.Ed.2d 701 (1977), the antitrust laws do not provide

Bie

a damages remedy for all losses traceable to conduct violat-

ing the antitrust laws, only for losses that are part ot the

anticompetitive effect of such conduct. When a seller

charges different prices to different purchasers, as alleged

here, injury to competition does not necessarily result.

Both the statute and the courts recognize this. 15 U.S.C.

§ 13 (a). See, ¢. g., United States v. United States Gypsum

Co., 438 U.S. 422, 450, 98 S.Ct. 2864, 57 L.Ed2d 854

(1978) . Competition is harmed only to the extent that the

favored purchaser, by use of the discriminatory price differ-

ence, actually draws sales or profits from his unfavored com-

petitor. See, ¢. g., Enterprise Industries, Inc. v. Texas Co.,

240 F.2d 457 (2d Cir.) , cert. denied, 353 U.S. 965, 77 S.Ct.

1049, 1 L.Ed.2d 914 (1957) ; Uniroyal, Inc. v. Jetco Auto

Service, Inc., 461 F Supp. 350, 357-59 (S.D.N.Y. 1978) ; Me-

Caskill v. Texaco, Inc., 351 F.Supp. 1332, 1341 (S.D.Ala.

1972) , aff'd sub nom. Harrelson v. Texaco, Inc., 486 F.2d

1400 (5th Cir. 1973) ; Handler, Changing Trends in Anti-

trust Doctrines, 77 Colum.L.Rev. 979, 992-93 (1977). See

also Perkins v. Standard Oil Co., 395 U.S. 642, 648-49, 89

S.Ct. 1871, 23 L.Ed.2d 599 (1969) (implying that disfa-

yored purchaser must show more than mere price differ-

ence to recover damages). As discussed above, there is no

evidence, much less substantial evidence, that such was the

case here.

[7, 8] Payne's reliance on FTC v. Morton Salt Co., 334

U.S. 37, 68 S.Ct. 822, 92 L.Ed. 1196 (1948), and its prog-

eny is misplaced. In Morton Salt, the Supreme Court held

that a violation of Robinson-Patman Act § 2 (a) may be in-

ferred from a substantial price difference. 334 U.S. at 46-

47, 68 S.Ct. 822. But the showing necessary to establish a

section 2 (a) violation is not the same as the showing neces-

sary to support a private action for damages. The Robin-

son-Patman Act is an incipiency statute.’ Price discrimina-

any actual competitive injury may be held to violate the

statute even though it will not support an action for dam-

ages. See Areeda, Antitrust Violations Without Damage

Recoveries, 89 Harv.L.Rev. 1127, 1127-28 (1976). See also

Gottesman v. General Motors Corp., 436 F.2d 1205, 1210

(2d Cir.) , cert. denied, 403 U.S. 911, 91 S.Ct. 2208, 29 L.

Ed.2d 689 (1971) (private injury does not necessarily ac-

company public injury). What Morton Salt found infer-

able from a substantial price difference was a threat to com-

petition sufficient to violate the statute. 334 U.S. at 46-47,

68 S.Ct. 822. Even assuming that Morton Salt is still viable,

it is of no help to Payne. In order to recover damages,

Payne had to show more than just a threat of antitrust in-

jury. As discussed above, it failed to do so.

Il. Amount of Damage

Our conclusion that Chrysler was entitled to a directed

verdict is buttressed by Payne's failure to adequately prove

the amount of its alleged injury.

Payne relied on its calculation of the alleged price dis-

crimination to establish the amount of its alleged lost sales

and profits. There is no necessary correlation, however,

and Payne failed to establish one.

To indicate the going concern value of the dealership at

the time it was allegedly forced out of business, Payne relied

on two alternative methods of calculation. Under the first,

Payne's expert assumed a good will value for the dealership

of $$2,000 in 1955 and appreciated this amount over 20

“Wection 2 (2) of the Clayton Act, as amended by the Robinson-Patman

am, 15 U § 13 (a), proscribes price discrimination “where the effect

of such discrimination may be substantially to lesen competition. .. .”

(Lmpphasis added) .

years at an annual rate of 4%. The expert testified that the

$52,000 figure was not based on an examination of Payne’s

financial statements. It represented an unsupported esti-

mate by Mr. Payne. The 4% rate was a rough average of

the prevailing inflation and prime interest rates from 1955

until the time Payne folded. Under the second method,

Payne's expert discounted projections of what the dealer-

ship's profits would have been if it had continued in busi-

ness free of the incentive programs. The expert testified

that he did not take into account local market changes or

conditions. The projections were apparently nothing more

than some of Payne’s past earnings roughly adjusted accord-

ing to Chrysler’s performance nationwide or the perform-

ance of the automobile industry in general. If Chrysler or

the industry had a good year it was assumed, without an ex-

planation why, that Payne would have a good year also.

[9-11] As was the case with Payne’s fact of damage evi-

dence, this showing was clearly not such as to allow the case

to go to the jury. In an antitrust damages action, as noted

above, the plaintiff must establish the amount as well as the

fact of damage. The burden of proving the amount of dam-

age is less severe than the burden of proving the cognizable

injury. See, e. g., Story Parchment Co. v. Patterson Parch-

ment Co., 282 U.S. 555, 562, 51 S.Ct. 248, 75 L.Ed. 544

(1931); Terreil v. Household Goods Carriers’ Bureau,

supra, 494 F.2d at 23-24. But the plaintiff must put forth

substantial evidence. The burden is not satisfied by mere

speculation or guess work. See, ¢. g., Bigelow v. RKO Ra-

dio Pictures, Inc., $27 U.S. 251, 254, 66 S.Ct. 815, 90 L.Ed.

1040 (1946) ; Keener v: Sizzler Family Steak Houses, 597

F.2d 453, 457 (5th Cir. 1979). Payne failed to meet this

burden. A price difference without more does not indicate

the amount of lost sales or profits. Self-serving and unsup-

ported assumptions cannot sustain a calculation of going

anQ2 o

concern value. On this ground as well, Chrysler was enti-

tled to a directed verdict. See, ¢. g., Kestenbaum v. Falstaff

Brewing Corp., supra, 514 F.2d at 695; Copper Liquor, Inc.

v. Adolph Coors Co., 506 F.2d 934, 953-55 (5th Cir. 1975).

The district court is directed to enter judgment for

Chrysler.

REVERSED AND REMANDED WITH DIREC.

TIONS.

- 33-

1288 DENIALS OF REHEARING EN BANC

UNITED STATES COURT OF APPEALS

Fifth Cireuit

° DENIALS OF REHEARING EN BANC

(Rule 35 Federal Rules of Appellate Procedure; Local Fifth Circuit Rule 12)

Group 1—Denials where no member of the panel nor Judge in regular active

Ce en ea nae ey

Group 2—Denials after a pol) recuested by a member of the panel or a Ciréuh

Judge in regular active service.

Group 3—Denials on the Court's own motion after a poll requested by a

member of the pane) or 2 Circuit Judge in regular active service.

Docket Date of Qhatios of

Tus Number eh Pai Dvcistes

GROUP |

Beard v. Starling ....... eh sess oben 79-2778 3/26/80 M.D.Ge., 613

F246 312

Burdine v. Texas Department of Com-

aie bb as obi ve eeviaws ea 77-1101 3/10/80 W.D.Tex, 8

F.26 563

RR RS Be i ene 79-1503 3/17/80 WPme, oe

F26

Conway v. Chemical Leaman Tank Lines,

LURES EY bp ecwedtiebesddseecee vs 77-2533 3/25/80 ED. oe

Fae

Devis v. Jackson County Port Authority . . 77-2708 3/10/ os oir

Green v. Amerada-Hess Corp. ........... 79-2027 3/18/80 a 612

ID os voc cwndies avbees cobee 78-2261 3/17/80 N.D.Ga., 612

F.26 577

Jatier v. Diefen@erfer .................. 79-3103 3/10/80 $.D Fia., 612

F.24 577

J. Truett Payne, Inc. v. Chrysler Motors

bd entnads deeeuhathnwnes ned bes Obi 77-233) 3/18/80

F.26 1138

Ketering v. King William Association ... .79-2341 3/28/80 a

S & M Materials Co. v. Southern Stone

eeitin Dots we de deinen de ethene 3/25/80 M.D.Ga., 612

F.2d 198

WT SD, CUED 6 os oo wddnwecicoedecticns 79-203 3/10/80 ED.Tex., 61)

é F268

- 34 -

Tis Lg

GROUP 1—Continued

et WG ass cond cv ctdsetéckdcees 79-5140

U. S. v. Morejon-Pacheco.............. 78-5748,

79-2084

Watson v. Callon Petroleum Co. ......... 78-140)

GROUP 2

Chrysier Credit Corp. v. J. Truett Payne,

URE ES RR ON a es 77-2331

3/17/80

3/18/80

N.D.Ala., 607

F.2¢6 1133

- 9€ -

WINTER

WINNERS

11/11/70 - 1/31/71

Paid on Sales After W/S Obj. Attained

C/L JTP oTP All Others

Pur. Obj. Group Sales Reb./P.U. Reb./P.U. Diff.

JTP - 99 Val-Bar 17 0 30 §10

Central - 63 Bel-Sat 13 0 45 585

Bessemer - 39 Ch-Imp 42 0 60 2,520

Roebuck - 54 Fury 17 0 45 765

Fy W/o 15 0 60 900

- € =

WINTER WINNERS

11/11/70 - 12/31/70

(Floor Plan Rebates Portion - Paid on Purchase)

Rebates P.U. Purchases

ITP $ -0-

Central 26.30 77

Bessemer 26.57 48

Roebuck 41.05 95

TOTAL REBATES JTP WOULD HAVE RECEIVED - $2,955.60

- BE -

1971 BiG DOLLAR PAYOFF

1/1/71 - 4/30/71

Rebates paid on Sales

JTP JTP ROE.

C/L Group Sales _Reb./P.U. _Reb./P.U. Difference

Val 51 28.43 * 54.03 $1,305.65

Others 163 107.98 35.59 (NEG. )

- 6€ =-

iad

1971 BIG DOLLAR PAYOFF

1/1/71 - 3/31/71

(Floor Plan Rebates Portion-Paid on Purchases)

JTP $ 26.38 188

Central -49 109

Bessemer 26.00 98

Roebuck 30.81 129

Total rebate JTP would have received - $5,792.88

JTP received $4,800.00. Difference - $ 992.28

- OF -

SUMMER SELLOUT

3/1/71 - Fall, 1971

Paid on Sales After W/S Obj. Attained

JTP JTP ROE

C/L Group Sales _ Reb./P.U. Reb./P.U. Difference

Val 110 $ 9.41 $25.06 $ 1,715.00

Bar-Sat-Fy 103 11.65 60.00 4,980.00

Ch-Imp 61 13.20 70.00 3,465.00

$10,160.00

- Tv =

WINTER

PROFIT DAYS

Paid on Sales After W/S Obj. Attained.

11/21/71 - 1/31/72

JTP JTP ROE +VEST

C/L Group Sales Reb./P.U. Reb, /P.U. Difference

1972 Val-Bar 28 -0- $ 35.00 $ 980.00

Sat 10 -0- 55.00 550.00

Fy-Ch-Imp 43 -0- 65.00 2,795.00

1971 Val-Bar 8 -0- 70,00 560.00

Sat 7 -0- -0-

Fy-Ch-Imp 15 -0- 130.00 1,950.00

$6,835.00

~ 2) -

STOCK ELIMIWNATOR

8/11/71 - 1/31/72

Rebates Paid on All salee<-

JTP JTP Hall

C/L Group __— Sales Reb./P.U, Reb. /P.U. Difference

Compact 40 $ 68.75 $ 68.18 (NEG, )

Other 108 100.00 100.00

- €b -

CHRYSLER-PLYMOUTH

SELL NOW

1/1/72 - 4/30/72

Paid on Sales After W/S Obj. Attained

Vestavia

JTP JTP Cen+Roe

C/L Group Sales ; Reb. /P.U. Reb./P.U. Difference

Val-Bar 81 $17.72 $35.00 $1,400.00

Sat 30 14.67 55.00 1,210.00

Fy-Ch-Imp 72 52.22 65.00 920.00

$3,530.00

CHRY/PFy

PROFI?T PROGRAM

1/1/72 - 3/31/72

Rebate on Sales

JTP JTP Bessemer

Sales Reb. /P.y. Reb./P.U. Diff.

$10.00: $82.76 $5,093.10

- $b -

CASH IW WIiTH CHRYSLER

5/1/72 - 6/30/72

Rebate Paid on Sales

J7P JTP Central

Sales Reb./P.U. _Reb./P.U. Diff.

31 $25.81 $80.43 $1,693.48

CLEAN-UP AWD CASH IW

7/1/72 - Fall 1972

Rebate on Sales

JTP JTP Central

Sales Reb./P.U. Reb,/P.U. Diff.

86 $39.53 $94,44 $4,722.22

abe

- Lv -

1972 SUMMER SWEEPSTAKES

4/1/72 - 7/31/72

Rebates on Sales

JTP JTP Central

C/L Group _ Sales Reb./P.U. Reb./P.U. Diff.

Val-Bar 79 $ -0- $ 42.02 $ 3,319.58

Sat 45 -0- 68.65 3,089.25

Fy~-Ch-Imp 140 -0- 110.00 15,400.00

JTP received $9,689 stock rebate $21,808.83

on 5%/P.U. but would have made

$12,119.83 more under terms of -_ 9,689.60

rebate program.

$12,119.83

—

- 8P -

CHRYSLER-PLYMOUTH

TRIPLE-PAY

10/1/72 - 12/31/72

Rebates Paid on Sales

JTP Central

El. Units Reb. /P.U, Reb, /P.U. Difference

152 $6.91 $49.23 $6,432.64

- 6) -

FURY-CHR- IMP TWIN DEAL

DOLLARS

1/1/73 - 3/31/73

Rebate Paid on Sales

JTP ROE

C/L Group El. Units Reb, /P.U. Reb. /P.U. Diff.

(3) 55 $3.636 $78.125 $4,096.88

CHRYSLER-PLYMOUTH EARLY

C LEAN - UP BONUS PROGRAM

6/1/73 - 1974 Model Day

JTP and Central opted for a Non-Discrimina-

tory Program which gave them a 5% rebate on

each 1973 Unit.

- 0S -

S$ UP ING

1/1/74 - 3/31/74

Paid on Sales After W/S Obj. Attained

JTP JTP Roe.

C/L_Group Sales Reb. /P.U. Reb. /P.U. Diff.

val 48 -0- -0- -0-

Sat 12 $ 35.00 $100.00 $ 780.00

Ch 19 50.00 150.00 1,900.00

‘73 Ch 33 100,00 300.00 6,600.00

$9,280.00

- 7 -

eee

PRIME RATE ON EILGuts

4/1/74 - 5/31/74

Paid on Sales After W/S Obj. Attained

JTP JTP Others

C/L_ Group Sales Reb, Rec'd Reb./P.U. _Diff.

Val 13 -0- $ 50.00 $ 650.00

Sat 4 -0- 100.00 500.00

Ch 12 -0- 150.00 1,800.00

*73 Ch 19 -0- 200.00 3,800.00

$6,750.00

- €$ -

"C" BODY BONUS

2/1/74 - 3/31/74

REBATES PAID ON SALES

El. Units

$90.91

33 $163.64

BIRMINGHAM METRO SALES COMPARISON Period 1971 - 1973

Page 1 of 2

NEW VEHICLES

Sales Average Total

Gross Profit

Profit

1971 Retail Fleet Total Retail Fleet Gross Net

J. Truett Payne Co. 562 161 723 390 208 $252,389 $ 72,215

Vestavia Chry.-Ply. 369 ae 373 365 na 143,492 46,788

Central Motors 467 16* 463 311 na 150,156 13,085

Roebuck Chry.-Ply.-Imp. 668 4* 692 335 na 232,054 17,779

1972

a. Truett Payne Co. 576 185 761 425 242 289,579 104,700

Vestavia Chry.-Ply. 568 4* 572 435 na 248,651 113,118

Central Motors 565 17* 602 372 na 223,776 75,472

Roebuck Chry.-Ply.-Imp. 765 s* 770 342 na 263,485 20,455

1973

J. Truett Payne Co. 567 210 777 435 312 312,008 110,853

Vestavia Chry.-Ply. 549 10* 559 361 na 201,641 23,164

Central Motors 399 20* 419 392 na 164,147 32,081

Roebuck Chry.-Ply.-Imp. 753 5¢ 758 380 na 287,787 36,248

* Dealer‘s financial statements do not reflect Fleet Sales.

Fleet unit sales quantities obtained from the “Dealer Fleet

Selling Plan Summary"

Period 1971 through 1973

J. Truett Payne Co.

Vestevie Chry.-Ply.

Central Motors -

Roebuck Chry.-Ply.-Imp.

Total New Total Fleet Fleet Sales

Per

1,504 18

1,504 53

2,220 14

Continued on Page 2

1,18

3.58

(te **z “7eq)

BIRMINGHAM METRO SALES COMPAIRSON

1971

J. Truett Payne Co.

Vestavia Chry.-Ply.

Central Motors

Roebuck Chry.-Ply.-Imp.

1972

J. Truett Payne Co.

Vestavia Chry.-Ply.

Central Motors

Roebuck Chry.-Ply.-Imp.

1973

J.. Truett Payne Co.

Vestavia Chry.-Ply.

Central Motors

Roebuck Chry.-Ply.-Imp.

Period 1971 - 1973

Page 2 of 2

Gross

$ 63,461

110,894

202,821

408,519

$114,901

116,854

157,042

470,748

$ 82,788

163,867

165,607

486,395

Net

$ 10,721

44,855

96,281

162,497

$ 24,708

39,153

64,291

173,001

$ 9,114

53,300

104,055

161,728

$(27,354)

6,684

54,651

47,752

$( 8,206)

4,519

93,052

36,378

$(53,510)

(80,234)

36,065

50,053

z 32¥4

(Te **Z *zeq }

Net Earnings Before Taxe:

Section 2(a) of the Clayton Act, as amended by the

Robinson-Patman Act: 15 U.S.C. § 13:

§ 13. Diseriminacon tn orice, services, or ‘acilities—Price;

seiection of customers

_a) <3 shail se usiawtui ‘cr any sersom engaged .. commerce. in

she course of such commerce. either directiy or .acirecur. to iia

crispinate in price Secween iifferent surcaasers 2f commeouices 3

ike grace aad quaiity, where either or any of ne purchases .cvoirec

ia suen diserimisation are in commerce, where such commocis.es ore

sold for use, consumption. or resale within she Ua:ted Staces ar aar

Tervitery :berect or che Siseric: 27 Coiumdia or aay insular sosses-

sion or other piace under the ‘srisdiction of che Vaited States, and

where the effect of such discrimination may Se suostantially *o ‘essen

ing from the differing methods or quantities ‘2 which such com-

modities are to such purchasers soid or delivered: Provided, towever,

That the Federal Trade Commission may, after due investigation

and searing to ail interested parties, fix and estactisa quasity im-

its, and revise the same as it finds necessary, as co parcicclar com-

modities or classes of commodities, where it finds :hat available pur-

chasers in greater quantities are so ew as to render differenciais on

account thereot unjustly discriminatory or promotve of monopoly in

any line of commerce: and whe foregoirg shall them x0t Se construed

to permit differentials based on differer.ces ia quantities sreacer San

these so fized and established: ~ And provided further, Tat nothing

herein contained shall prevent persons engaged in selling goods.

wares, or merchandise in commerce from seiecting ‘heir own cus-

tomers in bona fide transactions and not in restraint of trade: And

provided further, That nothing herein contained shall prevent price

changes from time to time where ia vesponse to changing conditions

affecting the market for or the marketability of -he goods concerned,

able goods, cbsolescence of seasonal goods, distress sales under court

process, or sales in good faith (n discontiauance of Susiness ia che

goods concerned.

Deecen of retutting srime-(acie case of Jiserimiaaiicon

(>) Upon proof seing made. at any hearing oa 2 complaiat uncer

this section, that there as been discrimiaation ia price or services

or facilities furnished. the burden of rebutting the primas-facie case

thus made

rendered in connection with he sale or purchase of zo0ds. wares, or

merchandise, either to the other party to such transaction or to an

agent, representative, or other intermediary cherein where such

intermediary is acting in fact for or in sehal?, or is subject to the

direc: or indirec: control. of any party to such cransaction other “han

Se person by whom such compensation ‘5 so granted or paid.

Payment foe services or tacilities for preceseiag of saie

(d) It shail 5e unlawful for any person engaged ix commerce :o

pay or contract for che payment of anything of value co or for the

benefit of a customer of such person in the course of such commerce

as compensation or in consideration for any services or <acilities

furnished by or through such customer in connection with the proc-

essing, handling, sale, or offering for sale of any products or com-

modities manufactured, sold, or offered for sale by such person, un-

less such payment or consideration is availadie on proportionally

equal terms ‘o ail other customers competing in the distribution of

such products or commodities.

Pureisbing services o+ tacilities for precensing, handiiag, ete.

ome purchaser against another purchaser or purchasers of a com-

modity bought for resale, with or without processing, by contracting

to tarnish or furnishing, or by contributing to the furnishing of.

any services or facilities connected with the processing, handling,

sale, or offering for sale of such commodity so purchased upon tarms

net accorded to all purchasers on proportionally equal terms.

Section 4 of the Clayton Act, 15 U.S.C. § 15

§ 15. Suits by persons injured; amount of recovery

JOHN TRUETT PAYNE

{TR. 40]

Q. And when is the first time you

became a Chrysler direct dealer?

A. In 1944 or ‘45.

Q. Where were you located, Mr.

Payne?

A. 408 South 2lst Street in

Birmingham.

Q@. How long had you or did you

remain in that location?

A. Abcut ten years.

Q. And were you selling Chryslers

after you moved from that location?

[TR. 41]

A. Yes, sir.

Q. Excuse me. When did you acquire

the J. Truett Payne Company?

A. Well, we bought out Leseur

Motors in 1955 and merged the two com-

panies.

Q. Now, in 1965 were you selling

Chrysler automobiles, your company?

A. Yes, sir.

Q. Was Leseur?

A. Yes, sir.

Q. And what was the price, or the

purchase price that you paid for this |

buying of the Leseur Motors?

A. I believe I paid forty-five

thousand dollars for his fixtures and

what equipment he had in parts.

Q. All right. Was there anything

else included in that price?

A. No, sir.

Q. Out of that price, Mr. Payne,

that you paid for Leseur, did he have

forty-five thousand dollars worth of

parts and fixtures on hand or was there

anything else in that price?

A. No. I would believe that, as

well as I remember, that about half of

that would be for equipment and parts

and the other half for goodwill, I guess.

Q.. Had he been in business a while?

(TR. 42]

A. Several years. I don't remember

how long.

Q. All right. In any event, you

bought him out and you started selling

Chryslers with his inventory, is that

correct?

A. Yes, sir.

Q. Did you have an inventory of your

own?

A. I had an inventory of my own and

then we took over some cars that he had,

but we bought them from Chrysler.

Q. All right. What was the net

worth of your business at that time,

J. Truett Payne Company, the Chrysler

dealer?

A. I would think around seventy-five

anal

i heal Fc, 4. Cae a7 een ek Oe

: 4 - f J

hundred or a thousand dollars. I don't

know.

Q. Was any of that portion of that

business amount made up of goodwill or

was it all stock merchandise, parts?

A. In mine?

Q. Yes, sir, in yours.

A. I would say it was all in mer-

chandise.

Q. All right. Since 1953 did you

operate J. Truett Payne Company Chrysler-

Plymouth dealership just like you oper-

ated it through 1974? Have you been

operating it --

A. Yes.

(TR. 43]

Q. -=- since 1955 with Chrysler?

A. Yes, sir.

Q. When did you terminate your

dealership relationship with Chrysler

Motors?

A. I believe it was in May of '74.

Q. All right. Prior to that time

in the 1960's, in the early ‘60's,

beginning of that decade, were you the

only Chrysler Plymouth dealer in the

Birmingham area or was there any other

dealership?

A. Well, there had been dealers in

Bessemer, but I believe we were -- what

time are you --

Q. In 1960.

A. Well, I believe I was the only

Chrysler dealer in downtown Birmingham

until -- I don't know, when they put

Central Motors in. Was it in '61?

Q. Well, in your best judgment, do

you know? When they put in Central

Motors, is that correct?

A. Yes, it was the first dealer they

put in.

Q. After they put in Central Motors

there was you and Central Motors, is

that correct?

A. Yes. When they put Central

Motors in, they put them in originally

as Plymouth only. They did not give

them Chrysler and Imperial. It was

just when they originally opened up,

they opened up with Plymouth.

(TR. 44)

Q. And subsequent to that time did

they acquire Chrysler and Imperial?

A. Sir?

Q. Did they start selling Chrysler

and Imperials after that?

A. At a later date, yes.

Q. All right. During 1970 through

1974 you were selling, your company was

selling Chryslers and Imperials and

Plymouths, correct?

A. Yes, yes.

Q. Can you tell the ladies and

gentlemen of the jury what other dealers

during that time, direct dealers, were

selling Chryslers, Plymouths in the

Birmingham area?

A. From '70 until --

Q. *34.

A. Well, I believe it was Roebuck,

Roebuck Chrysler Plymouth, Vestavia

Chrysler Plymouth, and Central Motors.

Q. All right. And yourself?

A. And us, yes.

Q. Can you tell the ladies and

gentlemen of the jury who’were your

competitors in your market in the

Birmingham market area for selling

Chrysler and Plymouth automobiles

during that time period?

(TR. 45]

A. It would have been Roebuck

Chrysler, Central Motors, Vestavia.

Q. All right. Can you tell the

Ooh a et. os ei, Se Pee —— *

= @ ww

jury, the ladies and gentlement of the

jury a little bit or characterize the

type or quality of competition in the

Birmingham market?

A. Well, it was rough. It was --

ask me that question again.

Q. Well, you said it was rough?

A. Yes, sir.

Q. Cam you tell us whether or not

you know if customers would check out

the prices of your automobiles?

A. Oh, yes.

MR. INGRAM: Wait a minute. If

it please the Court, I'm going to object

to does he know this and that unless

he's able to give specific facts and

circumstances.

THE COURT: Well, if it was based

on hearsay, it would not be admissible.

Q. No, sir. Mr. Payne, I‘m not

asking you based on hearsay. I want to

know in the industry your knowledge of

the industry. Do you know whether or

not your customers checked the prices

of your cars and checked prices of your

competitors’ cars?

(TR. 46]

A. Yes, sir.

Q. Did that happen frequently?

A. Yes, sir, because every deal,

every retail deal that you make is an

individual deal and the customers, the

people that shop us, that shop with us,

shop with the other dealers and there's

many things that contributed to it. As

these dealers opened up, they opened up

with new modern facilities, they put

Grand Opening sales on, and people that

buy automobiles, even though they pre-

sold through news media, if they make

up their mind they're going to buy a

Chrysler car, they're going to shop the

, :

ees!

other dealers.

Q. Well, do you know of -- let me ask

you one question. You mentioned some-

thing about modern facilities. How old

was your building?

A. I think --

Q. How long had you been in the

location that you were in during 1970

through '74?

A. We moved in in 1955.

Q. Where was that?

A. At 231 South 2lst Street.

Q. All right. And during that time

period 1970 through 1974 can you tell the

ladies and gentlemen on the jury whether

or not on ay occasions of your

(TR. 47]

own personal knowledge you knew the cus-

tomers would shop the prices of the

different dealers that you just men-

tioned?

67 /

Pe, sf S

A. Oh, yes, yes, sir, because they

would tell you when you were trying to

trade with them.

Q. All right. Have you ever talked

tO -=

MR. INGRAM: If it please the

Court, hold it. I object to any testi-

mony about shopping prices. That's

exactly what I was getting at. He said

people would tell them. That's a very

vague --

THE COURT: Well, that would be

inadmissible as hearsay. I sustain that

objection.

Q. All right. Mr. Payne, can you

tell the Court where in your opinion

most of your customers came from that

purchased cars from your dealership,

Chrysler Plymouth, new automobiles?

A. You mean the section of town?

Q. Yes, sir.

A. I would believe that most of our

customers came from the eastern section

and the southern section because that's

the heavier populated section.

Q. And was there or were there

repeaters, or people that came back to

you yearly and bought new cars from you?

A. Over a period of years, yes. We

had a lot of

(TR. 48]

repeat customers.

Q. And during -- let me rephrase

that. During 1970 to 1974, do you know

of people that came to you, would check

out your prices on new Chryslers and

Plymouths and then ended up buying

another car at one of the other dealers?

A. Yes, sir.

Q. You know that how, Mr. Payne?

A. From -- in dealing with the people.

Q. Did they come back for service at

your automobile facility?

A. Many of them did. Some of them

did not, but some of them did.

Q. So they would buy a car at a

different location and come back to you?

A. Come back to us to service the

automobile, yes.

Q. Did that happen numerous times --

A. Yes, sir.

Q. == over that four year period?

A. Yes, sir.

THE COURT: Gentlemen, I will

review my ruling. I will permit testi-

mony as to what customers told him, not

for the truth of what they said, but for

what they actually did tell him. You may

go into that.

(TR. 49]

Q. Thank you, Judge.

Now, Mr. Payne, during this four

year time period were there any incen-

tive and rebate programs that Chrysler

Plymouth or Chrysler Corporation spon-

sored for all the dealerships in the

area?

A. Yes.

Q. Can you tell the ladies and

gentlemen exactly what your understand-

ing is of those rebate programs?

A. Well, they had different kinds of

programs. Some of the programs were --

you were required to buy a certain

amount of automobiles to participate in

the program. Some of the other programs

you were on a quota basis. After you

sold a certain number of automobiles,

you would become eligible for the rebate,

There were severai of those programs and

it's been several years ago, I can't

recall these programs, but that was the

type programs they were.

Q. Do you know who established the

quotas that you mentioned on these

programs?

A. Well, the Chrysler Corporation

established them, but I don't know who.

Q. Were these programs written out?

Were they written in written form?

A. Yes. Yes, sir. Yes, sir.

Q. Your Honor, we would like to

introduce per

(TR. 50]

our stipulation some sixteen programs

that took place over this period of

time.

(TR. 51]

THE COURT: They will be

received in evidence as authentic with

leave to substitute any omissions.

MR. REEVES: Thank you, Judge.

Q. Mr. Payne, you mentioned earlier %

that you had been in that location for

approximately since 1955 --

A. Yes, sir.

Q. -- right before you went out of

business? How old was your facility

there?

A. I'm not sure, but I believe it

was built in 1925 or thereabouts.

(TR. 53]

Q. Mr. Payne, what did they tell you

about the ownership or renting of those

buildings, the facilities for Vestavia

and Roebuck?

A. Well, just in general discussion

they said that they were building --

they built Roebuck first; it was under

construction a long time and it was dis-

cussed from time to time and they just

told me that they were building it and

were going to put a dealer there.

Q. Do you know when approximately

it was built?

A. Well, I don't know exactly, but

it was around '67 or '68, wasn't it?

Q. All right. Now, what about

Bessemer which later moved to Vestavia,

when did they move to Vestavia, do you

remember ?

A. Was it ‘70?

Q. Well, do you have a judgment?

A. It was about that time. I don't

remember exactly.

OQ. And was that a new or old facil-

ity?

A. It was a new facility. It was

pretty much the same discussion about

Vestavia that it was about Roebuck.

Q. For these ladies and gentlemen —

who might not be from Birmingham, could

you tell them in general terms where

you're located and then describe if we

(TR. 54]

can, and I will draw where you tell me

to draw, describe on the board where

these other dealers were put in. If we

assume that this is the Birmingham city

limits --

A. Wel), you're going east would be

Roebuck.

Q. This would be north right here.

No, that's west. I'm sorry. East would

be Roebuck, right?

A. Yes, sir.

Q. All right.

A. South would be Vestavia.

Q. O.K.

A. And west would be Central Motors.

Q. All right. Now, where are you

located?

A. Well, based on the chart, I would

be more or less kind of in the middle of

the circle.

Q. Right here?

A. Yes. I was bottled in from all

sections except the north.

aie

Q. Can everybody see that? Let me

move this over a little bit.

O.K. Now, did the Chrysler rep-

resentatives that you mentioned, Sandusky

and other people, tell you anything about

who owned the Vestavia facility south of

you?

A. Said Chrysler.

(TR. 55]

Q. Did they specify who, what corpo-

ration?

A. No, just Chrysler.

Q. All right, sir. Now, in these --

let's go back to these rebate programs a

minute we were talking about. Did you

participate -- did your company partici-

‘pate in the rebate programs that Chrysler

sent out?

A. Well, we certainly didn't parti-

cipate in all of them. I don't remember .

whether we participated maybe in one or

—

at ad ’

vin She ee eae Sf oo Cy, PED Sa ee anes = _ ae 4 <<. >

+ 7

Se ——— —Po ~— —_- al _— a

two or not, but we didn't participate in

all of them or most of then.

Q. Were you able to -- and what was

the effect of these rebate programs?

Just tell the ladies and gentlemen what

happened.

A. On me?

Q. On your company. What did they

do?

A. Well, they had a -- we were placed

in a disadvantage in a trading position

and it had a demoralizing effect on my

sales force. We made some deals, natur-

ally. We had to sell some automobiles.

But we would possibly have to over~-allow

beyond what we normally would on used

cars to make a deal because in some of

those cases the rebates ran from, I would

believe, thirty to maybe two hundred

dollars, maybe more.

(TR. 56)

MR. INGRAM: Your Honor, I'm

going to object to this line of testi-

mony. He's saying they had to over-

allow. He's not testified as to what

other prices the other dealers were

selling them for. He hasn't testified

on any basis that there was any over-

allowance based on any sort --

THE COURT: Well, that's a con-

clusion.

Q. All right, sir. I'll go into it.

These rebate programs, can you tell the

ladies and gentlemen of the jury what

happened if you got or if you qualified

for the rebate program? What was the

effect of that? Did you get anything

from Chrysler?

A. Yes. You would get a rebate on

the cars that you sold to the retail

customer.

Q. All right. When you say a rebate,

what happened? hat was the effect of

that rebate on your company's cost?

A. Well, it would lower the cost of

the car.

Q. The cost of the car you purchased

from Chrysler?

[TR. 62]

Q. What does a customer look for --

well, let me rephrase that question.

When you were selling these automobiles

did you ever have occasion to determine

the price that you would charge the cus-

tomer based upon what you might get back

from the rebate program? Would that

influence the price that you charged?

A. Would that -- the customer?

Q. No. Would it influence the price

that you could charge the customer?

A. Well, yes, because on those

rebate programs if I was not getting the

rebate and the other dealer was getting

it, it would certainly influence it

because he would be actually owning a

unit cheaper than I owned it.

[TR. 65]

Q. Did you ever participate in what's

known as a stock rebate on old models?

A. Yes, sir.

Q. Can you tell the ladies and

gentlemen how that took place, what type

of program that was?

A. At the introduction of the new

models the Chrysler Corporation would

give us five rercent rebate on all new

and unused Chrysler and Plymouth cars

that we had in stock as of announcement

date of the new models.

Q. All right. You didn't have to

reach any sort of quota for that, did

you? | ‘

A. Wo, sir.

Q. Mr. Payne, you have described

generally to the ladies and gentlemen

what these programs were like, these

rebate programs that we're talking about

today. Can you tell the ladies and

gentlemen whether or not you have a

judgment or knowledge as to whether or

not it hurt your business that you could

not participate in all of those programs?

A. Definitely it hurt our business

when we couldn't participate.

Q. How would it hurt your business?

Just explain

[TR. 66]

it if yuu can.

A. Well, we would be unable to make

sales. We were not -- we were not in a

competitive situation.

Q. How did that affect the customer

that might be interested in buying a

Chrysler or Plymouth automobile?

81 -

A. Well, if I understand your ques-

tion, the customer would buy where he

could buy at the best price.

MR. INGRAM: If it please the

Court, I'm going to object again to this

line of questioning. He makes these

conclusions without any statement of

fact to back them up. I think it's

irrelevant to the issues in this case

and I think it's unsupported conclusion.

THE COURT: I overrule that

objection.

MR. REEVES: I'm sorry, Judge, I

couldn't hear.

THE COURT: I overrule the

objection.

Q. (BY MR. REEVES) Thank you, Judge.

What do you mean, Mr. Payne, when

you said that you couldn't participate in

the plans? I want to try to explain this ,

as much as we can.

A. Well, I'll try to explain it as

best I can. When we didn't qualify for

the program, we couldn't meet the quota.

All of those cars were bought from

(TR. 67]

Chrysler Corporation by all dealers at

the same price. Now, the dealers that

could meet their quotas and did parti-

cipate in the programs were at a finan-

cial advantage because they were actu-

ally buying cars cheaper from Chrysler

Corporation than we were because when

they sold those cars they were rebated

and in some cases it was as much as two

hundred dollars. Now, I know for a fact

because I was sales-minded, I talked to

and I had been in business a long time,

when I was a much smaller dealer, I did

a lot of retail selling myself, and I

knew a lot of these customers and a lot

of these customers would tell me I can

buy this car at this other dealer for

less money than I'm buying it from you

and I was in an unfair competitive posi-

tion. There was nothing I could do about

it. Another thing that it aid, you know, —

we worked salesmen on commission. They

would go out and lose business based on

that -- for that reason, and they would

become disenchanted. It was like throw-

ing a wet blanket over them when they

would lose deal after deal after deal.

It's just that simple, that those rebates

put me out of a competitive, or weakened

my competitive position.

Q. And when did your business close,

Mr. Payne?

(TR. 68]

A. May 24th, '74.

Q. And at that time what caused the

Closing of the business?

A. Chrysler Credit Corporation

withdrew our line of credit:.

Q. All right. Why did they withdraw

it, do you know?

A. Yes, we were out of trust.

Q. When you say out of trust, what

does that mean for the jury?

A. Well, we had sold some automo-

biles, that when we were unable to pay

for them, our cash flow had stopped and

had gotten to the point that we couldn't

pay for them.

Q. So you just couldn't -- you didn't

have enough money coming in from sales

is what you're saying --

A. That's correct.

Q. -- to satisfy your credit?

A. That's correct, if I may --

Q. Well, let me, if I may -- I don't

want you to volunteer anything. It might

be objectionable.

A. All right.

Q. So let me ask you, Mr. Payne, if

you. can tell the ladies and gentlemen

what caused you to not be

(TR. 69]

able to pay for the cars that you owed

Chrysler Credit? What was the cause of

that?

A. Well, I had -- I had run out of

money. I was not able to sell enough

automobiles at enough gross profit to

make money. It was -- that would be the

primary reason.

Q. Did the rebate program have any

effect on your ability to sell at a high

enough margin?

A. It should because again I was at

a traded disadvantage.

Q. How did they affect you is what I

want you to tell the jury? How did they

affect your inability to make sales?

A. Well, they could offer them to

wen

the public cheaper than I could.

Q. Who is they you're talking about?

A. The other dealers, the dealers who

were participating in the prgrams [sic].

Q. When you're talking about in this

area -- let me rephrase that. Who were

your competitors again?

A. Central Motors, Vestavia and

Roebuck Chrysler.

Q. So when yee? es referring to they

in those dealers, you're talking about

your competitors in Birmingham?

A. Yes, sir.

(TR. 77]

Q. (BY MR. REEVES:) Mr. Payne,

yesterday you had mentioned a little

bit about these rebate programs, incen-

tive programs. Can you tell the ladies

and gentlemen of the jury if fleet

sales -- what a fleet sale is in the

business?

A. A fleet sale is a sale of an

automobile to people who qualified for

wholesale price, so to speak, because

they used several automobiles in their

business.

Q. Were those sales made by you to

different people?

A. Yes.

Q. For instance, whom would your

company

(TR. 78]

sell a fleet to just as an example?

A. Well, Alabama Power Company,

Southern Natural Gas, people of that

type.

Q. Excuse me. I'm sorry. Go ahead.

A. Sir?

Q. I didn't mean to interrupt you.

Go ahead.

A. Alabama Power Company, Southern

Natural Gas, people in that type of

business,

Q. And did these rebate programs

cover fleet sales?

A. No, sir. I don't remember, but

there might at some time have been a

fleet program with a rebate attached

to it, but I don't remember of any, I

don't remember any.

Q. Well, normally then they would

not?

A. No, sir. No, sir, would not.

| (TR, 81]

Q. I said, in your opinion, how

much was the good will of the J. Truett

Payne Company in 1955, when you merged?

A. I would say it would be at least

twenty-five thousand dollars, because

that's about what we figured LaSeuer's

good will was at the time we bought

them out, and we had been in business

approximately the same amount of time.

(TR. 84]

Mr. Payne, the rebate programs

that you have mentioned, I wonder if you

could tell us -- I don't know if I asked

you. I may be repeating. But if you

could, tell the jury the effect those

rebate programs had on your competition

with the other dealers you testified that

you competed with.

A. My quotas were high, and we felt

for that reason or for that reason that

we were unable to compete with the other

dealers because we had to sell more auto-

mobiles, some cases in the purchase pro-

grams we had to purchase more automobiles,

and in many cases we just wasn't in posi-

tion to do it, we just didn't feel it

would be a good

{TR. 85]

business to do it, and in many cases we .

actually couldn't do it.

Q. Did that affect the price that the

ultimate purchaser in the Birmingham

sales area would have to pay for a

Chrysler-Plymouth automobile?

MR. INGRAM: I'm going to object

to that, Your Honor. It’s pure specula-

tion without any further predicate on

that question.

THE COURT: I overrule that

objection.

Q. You can answer it, Mr. Payne.

A. Will you ask the question again?

Q. Will the reporter read that ques-

tion back?

(The last question was read by

the reporter.)

A. I would say no. I can't see where

it would affect the retail customer,

because the rebates in most of those

programs were given to the dealer. They

were not passed on to the customer.

e (TR. 86]

CROSS-EXAMINATION

Q. Mr. Payne, you have talked about

the fact that you went out of business,

I believe, in May of 1974; is that cor-

rect?

A. Yes, sir.

Q. And I believe you said you lost

your line of credit?

A. Yes, sir.

Q. And that was with Chrysler Credit

Corporation?

A. Yes, sir.

Q. Mr. Payne, isn't it a fact and

you've also alluded to a two hundred

thousand dollar judgment by Chrysler

Credit Corporation against your company;

isn't that right?

(TR. 87]

A. Yes, sir.

Q. Isn't it a fact, Mr. Payne, that

the resson you went out of business and

what happened was that you sold about

two hundred thousand dollars worth of

automobiles and didn't pay Chrysler

Credit for them and that's the reason

you lost your line of credit?

A. At the time that I lost my line

of credit it was the reason.

Q. In other words, you were selling

cars in what they call out of trust;

isn't that right?

A. Yes, sir.

Q. And when that occurred, Chrysler

Credit came in and in effect foreclosed

on your inventory; isn't that right?

A. We assigned our inventory to

Chrysler Credit.

Q. And you ended up owing them some-

thing like a hundred seventy to two

hundred thousand dollars, didn't you?

A. Something like that.

Q. Now, you remember when I took your

deposition, Mr. Payne, and we talked

about your past history as an automobile

dealer in Birmingham, and I believe you

told me that you were the oldest Chrysler

Plymouth dealer in the state, isn't that

right?

A. Yes, sir.

(TR. 88]

Q. And didn't you tell me that you

sold more cars than anybody else in the

state?

A. I would believe that we sold more

Chrysler and Plymouth cars than anybody.

Q. Now, that being true, when is the

last time you made a profit in your

company, Mr. Payne?

A. We lost money for the last four

or five years that we were in business.

I would say that the last time that we

made a profit was before Chrysler put

ae St ee

these additional dealers in to share this

market with us.

Q. You made a profit in 1968, didn't

you, Mr, Payne?

A. I think so, yes, sir.

Q. And didn't all of those dealers go

into effect prior to 1968?

A. No, sir.

Q. Who didn't?

A. Vestavia was not in.

Q. Wasn't Vestavia the same as

Bessemer Chrysler, and located in

Bessemer prior to 1968?

A. Yes, sir.

Q. All it did was move from Bessemer

to Vestavia, is that correct?

A. No, sir. Bessemer Chrysler

Plymouth was a

(TR. 89]

very small dealer and had a very small

facility and did a very small business.

When they moved into Vestavia, they moved

into supposedly a million dollar facil-

ity --

[TR. 90]

Q. All right. Thank you, sir. Now,

you said that one of the problems you

had was that Bessemer moved over to

Vestavia, is that correct, and caused

some of your problems?

A. Yes, sir.

Q. Of course, you had no contractual

right, did you, Mr. Payne, to have an

exclusive franchise in that area that

covered Vestavia, did you?

A. Not at this time, no, sir.

Q. And in your mind there was nothing

legally impermissible about Bessemer

moving to Vestavia, was it?

A. Illegal?

Q. Yes.

A. I wouldn't know, sir.

Q. Now, when they moved over there,

didn't they move over there in May of

1971?

A. It was about that time. I don't

remember the exact date.

Q. Now, I'll ask you, after they

moved over

(TR. 91]

there, Mr. Payne, in May of 1971, whether

or not you in fact sold more automobiles

in 1972 than you did in 1971?

A. I don't remember whether we did

or we didn't, but I don't think the

amount of automobiles that we sold would

have anything particularly to do with the

amount of profit we made. Due to

increased competition and tougher com-

petition, we were having to sell those

cars at a smaller gross. So, certainly

when Vestavia, when Chrysler opened up

in Vestavia, it suddenly hampered our

business.

Q. Well, I don't understand that,

Mr. Payne. I want you to explain that

to me. If you are selling more cars

than you were the year before with them

over there in Vestavia, you're not losing

any volume, how is it that that is not

competitive?

A. Well, in 1969, Chrysler changed

the body style of the automobiles. It

wasn't a good year for Chrysler -- I'll

try to answer this as best I can. The

number of automobiles that you sell

doesn't always determine the amount of

gross, of profit that you make because

the more automobiles you sell, the more

it costs to handle them. We were trying

desperately to reach our quotas and in

many cases we had to take deals that

under normal circumstances we wculdn't

take

SS Oe eae

ayer 3

Stig

[TR. 92]

due *o increased competition,

Q. Mr. Payne, I mean, are you telling |

me and are you telling the jury that the

less cars you sell, the better off you

are?

A. No, sir, I'm not telling the jury

that. I'm trying to say that we were

forcing business and when you force 3

business you cannot force it at a profit,

a good profit or a reasonable profit.

Q. Why were you forcing business?

A. Because I was trying to reach my

objectives. I was trying to sell the

automobiles. I was trying to stay in

business. I was losing money and I was

trying to stay in business.

Q. Well, what did that have to do

with the sales incentive programs, Mr.

Payne, if you were just trying to meet

competition because they were selling

your customers? What's that got to do

with the sales incentive program?

A. Well, on those rebate programs --

I have testified before that it gave the

dealers that could participate an advan-

tage because they owned those cars at a

per unit less cost than I owned them and

it put me at a disadvantage.

Q. Mr. Payne, now, I want to ask you

this. I want to get to that subject

matter. You've testified

(TR, 93]

that it put you in a competitive disad-

vantage, that you lost sales and that

they were underselling you and all this

sort of thing. Let me ask you this.

How many sales did you lose? Do you

have any record of the number of sales

that you lost to another dealer because

of the bonus paid those dealers under

these incentive sales programs?

100

A. I wouldn't have any. record of

that, no, sir.

Q. You don't have any idea, do you?

A. I think if. you would look at

the -- when we started to losing money,

we had béen here for twenty-five years

and I think that the fact that when they

moved in these dealers on top of us, I

think that is proof enough that that was

the reason we were losing money.

Q. I'm not talking about the dealers,

Mr. Payne, I'm talking about the sales

incentive programs. I want to know how

you know and what you have to prove that

you lost sales to another Chrysler

Plymouth dealer because of the bonuses

paid under sales incentive programs?

A. I don't have anything specifically,

That's been several years ago. I can't

remember. I know this, that I was there

every day in the operation of my business

101

and I knew daily that we were losing

{TR. 94]

business on account of that. I don't

think any dealer could answer that ques-

tion.

Q. That's right, I agree with you,

Mr. Payne, because the only way you could

answer that, isn't it a fact, is if you

were to compare a sale that another

dealer made and see what that individual

bought it for and see what you would have

sold the same car for; isn't that right?

A. I didn't understand the question.

Q. Well, *he only way you'd ever be

able to know about that sort of thing is

to go and talk to your competing dealers

and see if they took a customer and used

the bonus rebate, the bonus incentive

program to reduce the price of the car to

the customer; isn't that right?

A. They had the rebate program, we

102

did not. So, I maintain that it put us

at a disadvantage. I'm trying to answer

these things as best I can and I won't

change my mind about that.

Q. Well, let me ask you this, Mr.

Payne, and I'll go back to my original

question. Do you have records, do you

have any concrete proof that you lost a

certain sale or a certain number of sales

that you otherwise would have made except

for the bonus program?

(TR. 95]

A. I think it would reflect in our

financial statement. That would be the

only proof that I'd have.

Q. But you don't know of any speci-

fic sales? You couldn't tell me today?

A. At the moment I don't know, but

I knew when it was happening when we

were operating the business. I knew then

because I talked to the customers, many

103

of them myself. My salesmen complained

of losing business for that reason.

Q. Now, let me ask you this, Mr.

Payne.. Another thing you responded to

is that your competitors, the other

Chrysler Plymouth dealers were using this

bonus money to reduce the cost of the

automobiles, is that what you were saying,

to the consumer?

A. I was saying that the rebate pro-

gram reduced the cost of the automobile

to the dealer. I would not know what

happened after then. But my statement

was that it reduced the cost per unit to

the dealer that qualified for the bonus.

Q. Well, I believe it was your testi-

mony also that it wouldn't affect the

retail value of the automobile, the last

thing you testified to, that it would not

affect the retail value of the automobile,

the resell cost of the automobile to the

104

consumer?

(TR. 96]

A. To the consumer? I would have no

way of knowing that because I wouldn't

know wivether they passed that on to the

consumer or whether they didn’t.

Q. Well, you testified -- the last

question Mr. Reeves asked you is whether

or not it would have any effect on the

retail sale of the automobile and you

said no.

A. I wouldn't think so. TI still say

it would not.

Q. So, what you're saying is to the

consumer or to the individual on the

street the bonus program is not going to

have any effect in enticing him to

buy from one dealer or another?

A. I didn't say that. It might have

an effect in enticing him to buy the

automobile, but I don’t think that

105

through a rebate program that anybody

particularly benefitted except the

dealers that were qualified for the

program and the manufacturere [sic]

because it helped the manufacturer move

automobiles by giving rebates to those

dealers who did qualify.

Q. Well, Mr. Payne, I need for you

to explain to me that if the purchaser

ef the automobile, the retail purchaser

doesn't get any benefit out of it, how

is it going to affect competition? How

is it

(TR. 97]

going to affect whether he buys a car

"from you or from somebody who qualified

under one of the bonus programs if the

retail price is not af fected by it?

A. I don't think that the retail

customer would actually know. He would

know if he was getting a buy in a car at

106

ed :

—s"

-@ lower price, and if he was buying a car

at a lower price, he would naturally buy

it from the dealer that gave him the low-

est price. That's where I say that the

rebate program was unfair because it was

on a unit basis.

Q. But you told me that the retail

bonus was not used to reduce the price to

the consumer. Now, how is that going to

influence the consumer whether he buys

from you or somebody else?

A. I can't answer that question, Mr.

Ingram. Various advertising gimmicks

are used daily to attract the customer.

Now, how would the customer know whether

he would profit by that or not? He

thinks so because he goes in, I guess,

to look at automobiles. There's programs

now running where you can buy an automo-

bile for one dollar above invoice. Now,

how does the customer, you know, the

107

retail buyer know that he can buy that

car for one dollar above invoice?

Q. Now, Mr. Payne, isn't it a fact

that the

(TR. 98)

thing that really ended your business

was the fact that you had a very poor

used car operation?

A. No, sir.

Q. It is not?

A. No, sir.

Q. You didn't testify in that depo-

sition that I took that the fact that

your wholesale or that your line of

credit on used cars was reduced is what

put you out of business?

A. I tesified that my, that they

reduced my line of credit on used cars

and we were forced to wholesale the used

cars that we could wholesale and try to

retail the other automobiles. Now, that

108

was brought ebout by Chrysler Credit

reducing our line of credit on used

cars.

Q. Mr. Payne, on page 77 of your

deposition, I want to ask you whether

or not Mr. Hairston, the lawyer for

Chrysler Credit Corporation, asked you

these questions and whether or not you

made these responses. "And in 1974,

the year you closed, you owed them six

hundred forty thousand dollars, in 1973

you owed them seven hundred eighty-nine

thousand dollars. Is that what you mean

by your credit, that your credit was

curtailed? Answer: Mr. Hairston, I

have never complained about my credit

being curtailed

[TR. 99)

on new cars, The thing that put me out

of business was when they curtailed my

used car operation, and they never did --

109

I always had enough new cars to sell,

That's not what I contend at all.”

Didn't you say that, Mr. Payne?

A. Yes, sir.

Q. And again on page 78 of your

deposition following that dialogue

we just had beginning at the bottom

of 77. “Question: Well, there wasn't

any real dramatic change in the amount

of credit that you were actually receiv-

ing from Chrysler Credit during the time

you were dealing with them, was it?

Answer: On new cars? Question: On

new. Answer: I don't know. Right

there at the last they might have cut

it some, but that is not my argument at

all. It is the used cars, When they

cut my used car credit, that's what

murdered me," Did you say that?

A. I don't know whether I said those

exact words or not, but I assume that I

110

did.

Q. And again on page 79 Mr. Hairston

asked you this. "So, you were still

maintaining the same sales level but the

cost of doing business was increasing and

cutting down on your profit picture; is

that right? Answer: Mr. Hairston, this

has come up twenty times before. The

thing that murdered me was that I

(TR, 100]

would go and sell a new car and trade in

a used car and because I didn't have the

line of credit to put it on my used car

lot, I had to take it would and whole-

sale it. That is what murdered me."

Didn't you say that, Mr. Payne?

A. I assume that I did, yes, sir.

Q. Mr. Payne, in fact, didn't you

attribute the fact that your used car

operation as affected by your line of

credit is what put you out of business?

lll

A. No, sir.

Q. In other words, you didn't mean

what you said in that deposition?

A. That was one of the things that

caused it. The thing that put me out

of business, and obvious from my finan~

cial statements, was the fact that when

Chrysler Corporation built these new

buildings and put in these dealers in

strategic points in the heavily populated

points. That's what primarily put me out

of business. It's that simple.

Q. And it wasn't the sales incentive

program?

A. The sales incentive program was

one of the things that was involved,

There was many things involved, but the

rebate programs were certainly a part of

it.

Q. Now, on these sales incentive

programs, Mr.

112

(TR, 101)

Payne, are you familiar with them gener~-

ally, those that you introduced into

evidence?

A. Most of those programs are differ-

ent. I'm familiar with them to a degree,

yes, sir.

Q. And basically would it be fair to

say that there are two types of programs?

One had a wholesale purchase objective

whereby you had to purchase a number of

cars to first qualify and then you were

paid on cars sold after you qualified,

That's one type, is it not?

A. Yes, sir.

Q. And the other type, as I under-

stand it, was basically a retail sales

program without any wholesale purchase

objective attached whereby you had some

base line objective to obtain and then

if you met that objective or went above

113

it, you received a bonus; is that cor~-

rect?

A. Yes, sir.

Q. Now, as I understand it, and you

tell me if I'm wrong, in order to qualify

for these wholesale, what I call whole-

sale, retail programs where you had a

wholesale purchase objective, basically

what you were required to do was to pur-

chase a given number of cars; is that

correct?

A. Yes, sir.

(TR. 102]

Q. Now, isn't it a fact that in many

of those programs, Mr. Payne, you did

not qualify?

A. That's correct.

Q. In other words, you didn't buy the

automobiles, purchase automobiles?

A. That's correct. In many of those

programs we could not buy it because our

114

quota, our percentage that they expected

us to buy was unfair, it was unreasonably

high. I maintain that is the reason we

could not participate in those rebate

programs,

Q. You say it's unfair and unreason-

ably high. Do you know how they were

calculated?

A. No, sir, but we were -- I know

this, that we were charged with forty

percent of the sales expectancy in this

area and some of the dealers were down

as low as twenty in those programs, and

that certainly had something to do with

the program,

Q. Now, the dealers you talked about

that had a smaller fair share, they were

younger dealers and they had been in

business less time, had they not?

A. Yes, they had been in business

less time.

115

Q. And they were located in different

parts of the city. One was in the east,

one was in Bessemer, until it moved to

Vestavia, and one was further west toward

Bessemer than you; isn't that correct?

A. Yes, sir.

(TR. 103)

Q. So y'all were located in different

areas?

A. We were ~~ the sales areas, I

assume, for all the Chrysler dealers were

the same,

Q. And you were in the central down-

town area, that's correct, isn't it?

A. Yes, sir.

Q. All right. And you were sur-

rounded, there were a lot of dealers in

the downtown area?

A. Yes, sir,

Q. And good, strong dealers, isn't

that correct?

116

A. Yes, sir.

Q. Like Drennen Motor Company and

Doug Willey Pontiac?

A. Yes, sir.

Q. And a number of them like that

who are really strong dealers?

A. (Nodding head affirmatively.)

Q. Now I want to ask you something

about your fleet sales, Mr. Payne. I

believe you testified that when you

sell a fleet, you get a lesser gross

per unit sold, is that correct?

A. Yes, sir.

Q. All right. And I believe you

also testified that as a general

proposition, these fleet sales did not

qualify under these sales incentive

(TR. 104]

programs?

A. Yes, sir.

Q. Mr. Payne, do you know what

117

percentage of your business was fleet?

A. Offhand, no, sir.

Q. What if I told you it was around

twenty-four or twenty-five percent of

your volume, volume of new cars sold?

A. Well, that's conceivable.

Q. And if that were true, and they

didn't count toward retail sales for

the sales incentive programs, wouldn't

that have some affect on your earnings

by the sales incentive programs?

A. I didn't understand the question.

Q. Well, if fleet sales do not

qualify under these various sales incen-

tive programs as retail sales for the

purpose of payment, and your business

constituted twenty-five percent fleet

sales, wouldn't that have some affect

on your earnings under these sales

incentive programs?

A. I wouldn't think so.

118

@. You say you would?

A. I would not.

Q. Why not?

A. Because the rebate programs were

([TR. 105]

on @ per unit basis, and it didn't apply

to fleet.

Q. That's what I’m saying. If you

sold a fleet car, and you couldn’t get

a bonus payment cn that fleet car, that's

a car you sold, you couldn't get a bonus

on, isn't that right?

A. Yes, sir.

Q. And if you had a high percentage

of your retail sales that were in fleet,

that would have an affect on your earn-

ings under our retail bonus program,

wouldn't it?

A. I can't answer that question. I

don't know.

119

Q. On these bonus programs, Mr.

Payne, and of the number that have been

introduced here into evidence, do you

know on the total how you compared with

the other four dealers in terms of

earnings?

A. No, sir.

Q. Would it surprise you to know

that you were second?

A. I didn't know that I was second,

but if I had been able to compete in

those bonus programs on those rebates,

maybe I would have still been in busi-

ness, if I was second.

Q. And, Mr. Payne, let me ask you

this, on those bonus programs it's your

understanding, is

(TR. 106]

it not, that anyone who qualifies at a

given level receives the same amount of

money per car as anyone else who

120

qualifies at the same level?

A. Yes, sir.

Q. No difference there?

A. No, sir.

Q. The difference is where you don't

qualify at all or where you qualified at

a lower level, is that correct?

A. Yes, sir.

Q. Now, on the wholesale purchase

program where you':.-e required to buy a

number of cars before you could sell,

you said you couldn't buy that number,

you weren't able to buy them. I assume

that's what you said, is that correct?

A. I don't remember the specific

programs, but they could have been a

number of things. We might have been

up to our limit on our line of credit.

We might have been overstocked with

cars at the time. We didn't feel it

was good business to enter into them and

121

for°that reason we didn't. We felt that

we could not afford to for one reason or

the other. (There was several things that

would be involved there, and, you know,

after all it's been several years ago,

and I just can't remember

(TR. 107]

each specific program.

Q. Yes, sir, I can: understand that,

and I'm not asking you to do that. But

basically it was an election on your part

not to purchase, isn't that correct?

A. Yes, sir.

Q. Now, you say your line of credit

-- I believe you testified in your depo-

sition that I read that you always had an

adequate line of credit for buying new

cars, did you not?

A. Not always, but most of the time

we did.

Q. And you said that your decision to

122

enter or not to enter one of these: pro- :

grams might be affected by what your

inventory was, is that correct?

A. Yes, sir.

Q. And are you aware that in calcu-

lating the wholesale purchase objectives,

the amount of the dealer's inventory is

drawn out of the objective, what he

already has on hand or in transit? Were

you aware of that?

A. I didn't understand your question,

Mr. Ingram.

Q. Well, you said that one of the

reasons that you gave for not entering

one of these wholesale purchase objective

programs is that you may

(TR. 108}

have had a large inventory at the time?

A. Correct.

Q. My question is, do you know that

in calculating your wholesaie purchase

123

objective that Chrysler pulled out from

that your present inventory to reduce

what ordinarily would be your objective

by the amount you already had in inven-

tory? Did you know that?

A. I can't answer that question, I

don't know whether -- I assume that they

did, but I just don't know,

Q. Yes, sir. Now, Mr. Payne, one of

your programs would come out, and isn't

it factually true that one of the dis-

trict managers would usually come by and

explain the program to you?

A. Yes, sir.

Q. And tell you how it operated?

A. Yes, sir.

Q. I mean you had no problem under-

standing the programs?

A. Wo, sir.

Q. Now, Mr. Payne, let me ask you

about ~~ I'll turn to another line here

124

that we've been discussing a little bit,

and when you were talking about your

value of your business and your good will,

(TR, 109]

and that sort of thing, I believe you

said you purchased LaSeuver Motor Company

in 1955, is that correct?

A. Yes, sir.

Q. You paid what, forty-five thousand

dollars for it?

A. Yes, sir.

Q. And you are saying half of that

amount to good will, is that correct?

A. Approximately.

Q. Well, what do you base that on? I

mean, how do you make that division, half

good will, nalf assets?

A. I didn't make that division, What

we bought from LaSeuer Motor Company was

his office equipment and his shop equip-

ment and parts, and I figured about

125

half -- when I agreed to pay forty-five

thousand dollars for the business, I

figured that he did not have that many

parts, but it was worth it for me to

get the business and the rest I con-

sidered good will.

Q. Well, are you saying that what

wasn't the value of the parts was simply

4 sum you paid him just simply to buy

the business from him or was it good will

or do you know or can you divide

(TR. 110)

them?

A. I'm trying to answer your question.

I just didn't understand that question,

Mr. Ingram.

Q. Well, what I'm asking you is, did

you simply pay him forty-five thousand

dollars to get and buy the business or

were you really paying him for good will?

I mean, was it set out that way in your

126

agreement?

A. No, sir. Mr. LaSeuer wanted

forty-five thousand dollars for the

business, and we felt that it was --

that we should buy it, and knowing or

feeling that there wasn't forty-five

thousand dollars worth of actual assets

that we were getting, we got none of his

accounts, none of his used cars or

anything like that.

Q. You say feeling. Did you take an

inventory? Did you do anything to deter-

mine what the actual value of the assets

were?

A. Mr. Rawls, who was our business

manager, handled that. It was his opin-

ion that there wasn't enough there to

compensate for the forty-five thousand

dollars, but we felt that LaSeuer had a

good reputation, he had been in business

about the same length of time that we

127

had been, and we were willing to go on

and buy it.

(TR. 111]

Q. And you did not continue to use

LaSeuer's name in your business?

A. No, sir.

Q. Ali right. What did you do, just

take over? Did he have a building or

anything?

A. Yes, sir.

Q. He had some real property, and

he had parts and equipment?

A. Yes, sir.

Q. Repair equipment and that sort of.

thing?

A. Yes, sir, office equipment and

some shop equipment, but LaSeuer had

taken it «= there had been a Chrysler

dealer there before, and a lot of that

equipment was old and unusable, but ‘

that's actually what happened.

128

Q. Now, Mr. Payne, you also testified

that at that time that the value of your

business in 1955 was, I believe you said,

seventy-five thousand dollars, is that

correct?

A. I can't testify to the exact

figure, but I would say that that is

reasonably correct, yes.

Q. Ient't [sic) that what you said?

A. Yes, sir.

Q. Now, did you say that in addition

to that or as a part of that, there was

twenty-five thousand

(TR. 112]

dollare in good will?

A. I would say as a4 part of it.

Q. As a part of the seventy-five

thousand dollars?

A. I can't answer that question,

What I said was that I felt that we had

been in business for ten years, and that

129

suddenly our good will -= we certainly

had, in my opinion, twenty-five thousand

dollars worth of good will, having been

in business ten years in the same loca-

tion.

Q. Did you sit down -- have you cal-

culated the value of your business at

that time? Do you have any figures or

calculations that you arrived at that

figure from at that time?

A. At the time that we made -- that

we merged and bought out LaSeuver, was

that your question?

Q. Yes, sir. Well, or at present?

Have you made any calculations to derive

that seventy-five thousand dollar figure?

A. TI still don't understand your

question, Mr. Ingram.

Q. Mr. Payne, let me simplify it for

you.

A. Please do.

130

Q. You told me your business is worth

seventy-five thousand dollars, and I want

to know how you

(TR. 113)

derived that figure of seventy-five

thousand dollars. I want to see where

you sat down and added up things and

came up with the severnty-five [sic]

thousand dollars.

A. At what time, Mr. Ingram? Which

business are you talking about, at the

time we merged with LaSeuver or at the

time I went out of business?

Q. I'm talking about at the time you

merged with LaSeuer.

A. Well, certainly. we had records to

substantiate it at the time. Now, that's

been twenty years ago.

Q. Yes, sir, that's what concerns

me. You are now saying twenty years

later it was worth seventy-five thousand

131

Gollars, but you don't tell me the basis

of the seventy-five thousand dollars.

That's what I want to know. Where are

your calculations to show that it was the

value of seventy-five thousand doliars

or is that just some figure you picked

up out of the air?

A. Mr. Ingram, it would be absolutely

impossible for me to go back twenty years

and tell you exactly what I remember at

the time, that when we made the transfer

we borrowed the forty-five thousand

dollars from CIT Corporation to buy out

LaSeuer, and we had to furnish them with

a reasonable financial

(TR. 114)

statement to be able to borrow the money.

Q. Mr. Payne, I'm talking about the

seventy-five thousand dollars that you

said your business was worth. Now, I

don't know whether you're talking about

132

your business combined with LaSeuver or

your business before you bought LaSeuer.

A. I'm talking about our business

before we bought LaSeuer out, because

CIT Corporation loaned -- made us a

capital loan to buy out LaSeuver Motor

Company, and it was a forty-five thousand

dollar loan; and it's reasonable to

believe, and I would believe that the

business certainly was worth that or

CIT wouldn't have loaned us the money.

Q. Well, you testified it was worth

seventy-five thousand dollars?

A. I still testify that I think it

was worth seventy-five thousand at least.

Q. But you can't tell me how you got

the seventy-five thousand dollars, I

guess is what you're saying?

A. Mr. Ingram, again this was twenty

years ago. I would have no way of --

my memory is not that good. I can't

133

remember exactly what the assets were at

that time. fF would believe that it could

have been worth even more money than that,

but I

(TR. 115]

would believe or would have to believe

that it was worth at least that much or

CIT would not have made us a capital loan

to buy out LaSever.

Q. But you don't have any present

books and records to reflect that?

A. No, sir, I do not. No, sir, I do

not.

Q. And it's just your best opinion,

I suppose?

A. Yes, sir.

Q. All right. I just want to ask you

a question. I may not have understood. .

But when was your present facility built?

A. I'm not sure, but I believe it was

1925.

134

Q. ‘'257

A. Or it could have been 1935. I'm

not sure. I wouldn't know.

Q. Now, when you went out of business

in 1974, Mr. Payne, I believe you valued

the present value of your property at

fifty to seventy thousand dollars or the

value of the business at that time?

A. Yes, sir.

Q. Now, I'm going to go through the

same thing we did on the seventy-five

thousand dollars. I want you to tell

me how you got fifty to seventy thousand

dollars?

A. Well, at the time we went out of

business

(TR. 116]

after we had turned over our inventory

to Chrysler Credit, we had some office

equipment, some other equipment and I

would -- we were there -- we had been

135

in business for thirty years. It was

actual ~- actually it was a going concern.

We had not -- the company -- the corpora-

tion was still in existence, and I feel

that the good will alone would have been

worth seventy-five -- fifty to seventy-

five thousand dollars.

Q. Well, now, you say the good will

alone. Let me ask you if you took this

into consideration in figuring that,

Mr. Payne: Now, here you had a business

that hadn’t made a profit since 1969;

here you had a business that didn't even

own the building they were in, and the

building was built in 1925 or 1935, and

leased, and isn't it a fact that your

Chrysler franchise agreement says you

can't sell your franchise without the

written consent of Chrysler?

A. That's correct.

Q. Did you take all of that into

136

consideration in arriving at that figure,

Mr. Payne?

A. Yes, sir, I took it all into con-

sideration, because a lot of people would

like to have a downtown or Chrysler

dealership, and I would believe

(TR. 117]

that that would be more than a fair price

as far as good will is concerned for a

company that had been in business thirty

years.

Q. And hasn't made a profit in the

last five or six years?

A. That's correct, sir. We made

profit from time to time. Other busi-

nesses, other automobile dealerships

right in the City of Birmingham have gone

for periods of time without making a

profit. Maybe if we had been able to

participate in those rebate programs,

maybe we would have had a better flow of

137

cash and could have made a profit instead

of having a long losing streak.

Q. And maybe if you had had a better

used car business, you would have stayed

in business, isn't that right?

A. And I'm not trying to get into a

discussion with you, Mr. Ingram. Basi-

cally I believe and I cannot change my

mind that the fact that Chrysler Corpo-

ration came in and put dealers all over

me in new buildings, that participated

in the same occupation that I was parti-

Ccipating in, that I can't help but

believe that that is what put me out of

business. I will die believing it,

because that is the primary reason. I

did all right for twenty-five years

without

(TR. 118)

that competition.

138

(TR. 123)

REDIRECT EXAMINATION

(TR. 124]

Q. Okay. You also mentioned on your

examination with Mr. Ingram that there

was tough competition in this area, and

that you were having to sell at a smaller

gross profit in order to compete?

A. Tjat's (sic) correct.

Q. Could you in many cases meet the

low price that the other dealers,

Chrysler-Plymouth dealerr were offering?

A. No, sir.

(TR. 125]

Q. Was this during the rebate pro-

grams that we're talking about?

A. Yes, sir.

Q. Did those rebate programs -- I

think you have said -~- let me rephrase

it.

I think you have said those

139

rebate programs affected the cost per

unit?

A. They did,

Q. Now, if you had a higher cost

per unit because you didn't participate

in the rebate program, and another

dealer here did participate in it, and

had a lower price per unit, then would

that affect the price at which you could

offer the car for sale to the public?

A. Yes, sir.

Q. So it would affect the price of

the car to the public, is that correct?

A. It could, yes, sir.

Q. Okay. Can you lean back a little,

Mr. Payne. There you go. You were

oreathing in the microphone. That's all

right.

Mr. Payne, do you know how many

cars you sold, your corporation sold in

1970? Would that be or would that be

140

reflected on some document somewhere?

(TR. 126]

A. It would be reflected on a fin-

ancial statement.

Q. You're talking about the dealer

financial statement?

A. Yes, sir.

Q. Do you know whether or not or

did you ever discuss with Chrysler

Corporation whether or not in 1970 your

sales for the Birmingham area amounted

to forty percent of the business in this

area, in other words, what they said was

your fair share?

A. Well, now, that was my fair

share, according to Chrysler Corporation.

We discussed it from time to time, yes,

sir.

Q. That's because you never did --

you could not ever get to that fair

share?

141

A. That's correct,

Q. During these rebate programs you

told Mr. Ingram that you didn't have any

specific data on each sale that your

company lost. Can you tell us how you

know that your company lost sales because

of the rebate program?

A. Well, your customers would come

into your showroom, and you would lose

the business there. You knew they bought

Chrysler automobiles, because it would be

shown in your registration sheet, and

(TR. 127]

they would tell you, "I could buy this

ear over here for less than I can buy it

from you, and I'm going to buy it over

there," and in many cases some of our

customers that we had had for years

bought and then came back to us to ser-

vice the automobiles for them,even for

the free service.

142

(TR, 134]

GEORGE IGNATIN

(TR. 137]

Q. Can you tell the ladies and

gentlemen of the jury just briefly what

types of programs and what are the

effects and what happens when a dealer

(TR. 138)

participates in those programs in

Birmingham?

A. It's my understanding that this

is a fairly normal procedure in the

automobile industry, at least it is for

Chrysler. They have a regular means of

rebating monies to the dealership. These

are bonus programs, quota programs set

up in which each of the dealers is given

some kind of a planning potential or a

fair share and if they meet or exceed

that, depending on which program, they

then get certain monies back from

143

Chrysler. Now, the effect of this is to

reduce the cost of the car to the dealers

per unit. The money is paid by Chrysler

in almost all of these programs on the

number of cars that these dealers sell

to final consumers. The dealers pay

Chrysler an equal amount for the cars and

then the effect of this, or of all these

programs, then, is to reduce the cost to

the dealer of the cars that the dealer

buys from Chrysler.

Q. Can you tell the ladies and gen-

tlemen if there is a purchase objective

in most of these programs, and tell them

what that means.

A. In a couple of programs, not most

of them as I recall, there was what we

call a wholesale purchase objective as |

well as a retail objective. Now, the

purchase objective refers to the dealer's ‘

144

(TR, 139]

purchases from Chrysler. The retail

objective refers to the number of cars

the dealer sells to ultimate consumers,

Now, as I say, in a couple of these pro-

grams, not a majority of them, the

dealers have to purchase a certain num-

ber of cars from Chrysler before they

qualify for the rebates which are based

on the sales made to the ultimate con-

sumers.

Q. So, the monies paid are based on

the sales for the most part; is that

correct?

A. Yes. The monies in all cases

except, I think, two where there was a

floor plan involved, and it's not clear

whether that's a purchase or retail,

but in all the cases other than that,

the actual rebate or di»-ount on cost

was paid on retail sales by the

145

dealership to consumers.

(TR. 191)

Q. Do you have a total figure, Dr.

Ignatin, for the amounts of rebates that

you have figured on your chart in the

last column, the charts, excuse me, that

we were gOing over a iittle while ago

that shows the total difference over the

four year span for J. Truett Payne

Company?

A. Yes. The total difference between

what -- you mean between what J. Truett

Payne would have received if they had not

been discriminated against?

Q. Right.

A. My figure is eighty-one thousand

two hundred forty-eight doliars and

ninety-four cents.

{TR. 202]

Q. Now, based on your knowledge and

the fact that you have been teaching and

146

dealing in competition and the effects

that price differences have on competi-

tion in a given market, can you tell

the ladies and gentlemen of the jury

your opinion of the effect that these

programs that you've charted for us have

on competition in the Birmingham market?

MR. FORMAN: Your Honor, I would

object to that on the grounds he shows no

knowledge of the automobile market, that

he's made any studies in the automobile

market.

THE COURT: I overrule. His

opinion, the credibility of it is for the

jury.

A. This is, of course, in the form of

some degree of speculation. But we do go

back to economic theory and see what we

would predict would happen from this kind

of a situation. The cost difference to

Payne means that they're paying Chrysler

147

eg .

more per unit than the other dealers.

Now, they have to compete with these

other dealers and they have to compete

although they're paying higher costs to

Chrysler for the cars. Now, this has a

two-pronged

{TR. 203]

effect on competition which we would

look for. First, it makes Payne less

able to compete in the selling of cars.

It's normal business procedure and it's

well known that the salesman discounts

off of list price, and the ability of

the sales[man] to discount off of list

price clearly will be related to the

cost of the dealership to the automo-

bile company. So, if you have two com-

panies competing with each other and one

has a higher cost than the other, the

ability of the one company to compete is

less than the other. Now, not only does

148

this impair Payne's ability to compete

with the other company, it also hurts

competition in the sense that the company

enjoying the price discrimination is

insulated from competitive forces and

does not itself have to compete vigor-

ously, which is to say, they're isolated

from the competition that would have

resulted from Payne if Payne had gotten

the equally low price or the equally

high rebate. So, Roebuck or Central,

which in most of these cases were the

ones who received the benefits of these

price discriminations, were insulated

from having to compete as vigorously

with Payne as they otherwise would have

had to.

Q. What effect does that have on the

price of a given product to the ultimate

consumer?

{TR. 204]

A. Well, the predicted effect is that

149

these other companies not having to

compete as hard and Payne not being able

to compete because of this price dis-

crimination, the predicted effect is

that the price that the ultimate consumer

would pay for the goods would be slightly

higher.

Q. Have I asked you, Dr. Ignatin, to

determine from the dealer financial

statements of the J. Truett Payne Company

as best you could the different cash

flows and revenues over a given period

of time?

A. Yes, I did look at that.

Q. Have you examined the volume of

sales over a period of time from 1967

through 1974 for J. Truett Payne Company?

A. Yes, I have.

Q. Where did you get all this inform-

ation?

A. From the financial statements.

150

Q. Dealer financial statements?

A. Dealer financial statements, yes.

Q. And have you made an attempt --

let me rephrase that question. In the

studies and courses that you are teaching

at the University of Alabama and else-

where, does the study of economics get

involved with or do you determine the

going value or the market value of a

going concern in a market,

{TR. 205]

business of selling products in a given

market?

A. Yes, this is a standard question

in many economics courses and finance

courses, the valuation of a business,

yes.

Q. And have you made an attempt to

make an evaluation or give your opinion

as to the market value of J. Truett

Payne Company as of May 28, 1974, when it

131

went out of business?

A. Yes, I have made two attempts. I

have used two methods.

Q. When you say two attempts, you

mean you took two different approaches?

A. Yes, two different methods.

Q. Could you tell the ladies and gen-

tlemen of the jury your opinion as to the

value of the going concern of J. Truett

Payne Company on May 28, 1974?

A. O.K.

MR. FORMAN: Your Honor, we'd

object to that until he lays an adequate

predicate of what he did.

THE COURT: I overrule the objec-

tion.

Q. You may answer,

A. First let me say the problem

involved is to figure out what J. Truett

Payne would have been worth in May of

1974 as a going concern if they had not

152

suffered the price discrimination which

I have

[TR. 206]

estimated cost them approximately

eighty-one thousand dollars over the

previous four years. Now, J. Truett

Payne lost money in each of those four

years and they would have lost eighty-

one thousand dollars less than that if

they hadn't been discriminated against.

So, the question, then, for me to figure

out is how much was that business worth

as of May, 1974, if they. had not been

discriminated against in these programs,

which is to say, had eighty-one thousand

dollars more than they actually did.

Now, I used two methods. The one method

is a very simple method which I used just

to get a ballpark estimate to see if I'm

going to come to somewhere in the right

place to it. For that I went back to

153

what the business was worth back in 1955

when it opened in the location it was in

in 1974. From conversations with Mr.

Payne, he told me that he bought out

Leseur in 1955 for forty-five thousand

dollars and he estimated that of that

purchase price, about twenty-two thousand

five hundred dollars was goodwill. Now,

goodwill refers to the value of the busi-

ness beyond its physical assets. This

refers to the value of customers and the

good name of the business. Well, at the

time that J. Truett Payne bought Leseur

in 1955, he merged his own business,

which it was itself

(TR. 207]

a going concern into the business, or he

actually did it the other way, he merged

Leseur into his business at a new loca-

tion, and from conversations with Mr.

Payne he said that his business was worth

154

about a hundred thousand dollars at the

time. He was not clear as to what the

goodwill of his business was worth.

Q. Let me give you an assumption or

a hypothetical to take into account in

your answer, Doctor, that assuming that

J. Truett Payne has stated or testified

that his goodwill at that time was

approximately twenty-five thousand

dollars. Could you make an opinion, give

your opinion as to the goodwill of the

company as of May 28, '74?

A. He declared in court that it was

twenty-five thousand dollars?

Q. Yes. I want you to assume that.

A. Now, the estimates I had made the

other day which I gave to the other

attorneys was that I assumed about a

thirty thousand dollar goodwill involved

for Mr. Payne's business based on what

he had paid for Leseur's goodwill and if

155

his evaluation of his company was a

hundred thousand dollars, that it would

be worth somewhere around thirty thousand

dollars. I started on the assumption

that his

(TR. 208]

goodwill in 1955 was fifty-two thousand

five hundred dollars. Now, you're saying

that it would be, that his part was only

twenty-five thousand. That would reduce

it to forty-seven thousand five hundred

dollars, the goodwill in 1955.

Q. Right. Do you need a calculator,

Doctor?

A. I think I might be able to do this

by hand.

Q. I apologize.

A. It looks like about a twelve

thousand dollar difference.

Q. What is your opinion as to the

market value of the going concern as of

156

May 28, '74?

A. Now, using this first method, I

used a figure of about a four percent

growth in the value of that firm per

year for each of those twenty years,

Now, the method I used was to use a

combination of interest rates and rates

of inflation. Economists use both

methods. It usually depends on which

one is higher and what they're interest

in seeing. I don't feel particularly

strong about either method. They're

both good methods. They're both

accepted methods in the profession. I'm

not prepared to argue that one method

is superior to the other. I prefer using

both. So, I used four percent, which is

just a rough average of the inflationary

and the prime interest

(TR. 209]

rate over that twenty year period.

157

Interest rates tended to be a little

higher than that and inflation tended to

be a little lower than that four percent.

My figures indicated that with my origin-

al estimate of fifty-two thousand five

hundred as the going concern value in

1955, that the firm in 1974 would be

worth about a hundred fifteen thousand

dollars. Given what you just said that

Mr. Payne testified, if the firm started

out at forty-seven thousand five hundred

dollars, that would mean, and this is a

guess, I think I need a calculator, you

can use one if you want, but it's going

to be slightly over a hundred thousand

dollars. I don't know if you need preci-

sion on this anyway.

Q. Is that a common and standard

method in your profession as to make

adjustment of a value of the goodwill of

a company over a period of years?

158

A. Yes. It's not the preferred

method, but it is one other method if you

have no other way and it is good to give

you some idea of what kind of estimate

you're coming up with to check your

figures to see if things are happening.

Obviously the value of Payne's business

could have grown more or less than this

four percent average per year over the

twenty years. A better method is the

second method which

(TR. 210]

I used, and this was an attempt to esti-

mate how much money J. Truett Payne would

have earned or lost in each of the four

years after it went out of business.

Q. The second metho? is also a stand-

ard method in your profession in deter-

mining goodwill and value of a going

159

Q. O.K.

A. Now, in 1974, Payne lost twenty-

two thousand three hundred thirty-five

dollars in the four months it was in

business. However, I also determined

that in 1974 they lost sixteen thousand

and thirty dollars due to price dis-

crimination in these rebate and bonus

programs, which means that in 1974 Payne

would have lost a little over six

thousand dollars if it had not suffered

price discrimination in these programs.

Now, they were in business for four

months. I took that figure of about

sixty-three hundred and five dollars and

I multiplied that by three, and that came

to nineteen thousand dollars and I raised

it to twenty because it's easier to

work with and I said let's assume that

Payne would have lost twenty thousand

dollars during 1974 if they had been in

160

business the entire year and had not been

subject to these discriminatory rebates.

All right. 1974 was

(TR. 211]

a very bad year in the American automo-

bile industry. This was the year folliow-

ing the Arab oil boycott, the embargo on

oil sales, the extremely rapid increase

in the price of all forms of energy and

the overall inflation in the country. In

addition, gross national products, the

total dollar value of goods and services

sold in this country in real terms fell

in 1974. So, it was a very bad year for

the whole economy and it was particularly

bad for the automobile industry. Now, in

1975, what would Payne have done? Well,

I related 1975 to '74. ‘75 was a bad

year for the American automobile industry,

but not as bad as 1974, although Chrysler

had their worst year in their history in

161

1975. This was a disaster year for

Chrysler, in large part, however, due to

overseas operations. Now, what I )

figured was that given the fact that '74

was such a bad year with inflation,

with the rising pric» of gas, with

Chrysler being caught perhaps with the

wrong models or whatever, but in real

bad shape, that if Payne would have lost

twenty thousand dollars in 1974, he

probably would have lost around ten

thousand dollars in 1975. Now, that

ten thousand dollars loss in 1975 needs

to be refigured back as to its dis-

counted value in 1974,

(TR. 212]

Q. Is that because -- can you tell

the ladiés and gentlemen why?

A. As I understand it, what I'm

trying to do here is figure out how

much the firm was worth in 1974 and so

162

losses suffered in 1975 need to be

discounted either by the rate of infla-

tion or the interest rate to figure out

how much the value in 1974 of these

losses in 1975 were.

Q. Okay.

A. Again we're trying to figure out

what the value in 1974 was for losses

or gains in years after 1974. I used

a six percent discount figure. Now,

here again we have three different

figures. We can use the rate of inflia-

tion [sic], we can use the prime rate of

interest or the legal rate, and the

legal rate is six percent. That has

never appealed very much to economists

except coincidentally. We've always

preferred primary or the rate of increase

in the Consumer Price Index. The reason

I use six percent is because that is a

better figure for later years and it's

163

actually over -- this understates the

value of Payne's business, if I use that

lower figure in 1975.

Q. So this would be a conservative

result?

A. Yes, this is a conservative

figure, and

(TR. 213]

I wanted to do it for consistency.

Instead of using like a nine percent in

‘75, and then a six percent figure in

‘76, I figured I would just use a six

percent figure for both years, even

though this reduces the value of Payne's

business slightly. It's not enough to

make a big difference, though.

Okay. For 1976, what would have

happened? Well, 1976 was a banner year,

this was the best year in Chrysler's

history, this was the best year in the

American automobile history. General

164

Motors made the largest profit they had

ever made. Chrysler made the largest —

profist [sic] they had ever made.

American Motors made the largest profit

they had ever made.

To see how well J. Truett Payne

would have done in 1976, if they could

have stayed in business, and I think

they could have stayed in business

because as I said, they suffered

$81,000.00 worth of discrimination, and

their losses in '74 and '75 would have

only been $30,000.00, so I then went back

to see what J. Truett Payne's best year

was, and coincidentally J. Truett Payne's

best year also was the best year that

Chrysler had ever had prior to 1976, so

the Chrysler Corporation's best year

prior to 1976 was 1968. J. Truett Paynes

best year was 1968.

165

{TR. 214]

In 1968 J. Truett Payne made $36,000 some

odd dollars, a little more than

$36,000.00. Now, how much would that

$36,000.00 that Payne made in 1968 have

been in 1976, recognizing inflation, the

growth of the economy, growth in the

Birmingham area, et cetera? Well, the

method I used again was a conservative

method. I decided to use the increase

in profits that Chrysler itself came up

with between those two years.

Now, Chrysler made approximately

33 percent more in 1976 than Chrysler

made in 1968. It seemed to me then very

reasonable to say that Payne would have

made about 33 percent more in 1976 than

it would have made -- than they made in

‘68. So they made a little more than

$36,000.00. I think the exact figure

was $36,890.00 that they made in 1968.

166

I increased that by one-third, and I came

out to a round $50,000.00 is what Payne

would have made in 1976, if they could

have stayed in business until last year,

and of course that has to be discounted

and when I discount that at a six percent

rate for two years, that is a present

value in 1974 of $44,500.00.

Now, the question is, what wouid

Payne have done in 1977? Well, '77 is a

good year for automobiles, it's a better

year for Ford and General Motors than it

is for Chrysler. Now, remember Chrysler

(TR. 215]

had the best year in its history in 1976.

This year they are not doing quite as

well. I believe their sales were off

about twelve percent as opposed to last

year. So I figured that Payne's profits

and sales probably would have fallen off

for 1977, and so I estimated that

167

i <>

although 1977 will be a good year, and

all of the signs are favorable, that the

economy is starting to pick up even

after the bad winter, that Payne still

would have made at least $20,000.00 this

year, and when this was discounted back

to 1974 values that comes out to

$16,792.00 using six percent discount

figure.

By the way, I said the economists

don't usually like the legal six percent

figure. We've got a very nice coinci-

dental situation today. The rate of

inflation is about six percent, the prime

rate on interest is six percent, and the

legal rate is six percent today, so it's

one of those happy coincidences in his-

tory when they all come together to use

the same discounting figure, and there is

some reason to believe that this will

stay that way over the next six to eight

168

months.

Okay. For 19738, again we are

trying to figure out what's going to

ha.,»<a. I suspect that ‘78 will be

about as good a year as 1977. There

(TR. 216]

will be changes in the American auto-

mobile market, no doubt, but basically

in terms of predictions of what happens

to Gross National Product, the rates of

inflation, et cetera, '78 looks like it

ought to be a slightly better year than

1977. Looks like it will be --

MR. FORMAN: Your Honor, I'm

going to object to him going any further.

This is pure speculation. He even said

he just suspects this.

THE COURT: I sustain with respect

to ‘78,

Q. All right. Dr. Ignatin, then

based on up through your judgment in '77

169

as to the performance that J. Truett

Payne Company would have had, had it

stayed in business, can you give us

your opinion as to the value of the

company as far as its value as a going

concern in 1974, when it went out of

business?

A. Okay. Up through 1977, I can

add that, it comes out to about

$32,000.00 in additional value which is

to say $32,000.00 would be the discounted

value in 1974 of the earnings from 1974

through 1977 that Payne would have earned

if they had not been subject to this dis-

criminatory bonus and rebate program,

and if they had stayed in business

through 1977, so that was $32,000 --

approximately $32,000.00

(TR. 217]

I think it comes out to $31,858.00.

Q. All right. What's the --

170

A. Well, that's not precise. That's

more precise than -- somewhere around

$32,000.00.

Q. All right. Now --

A. Now, in addition to that, however,

if the firm had stayed through 1977, it

would have been a going concern. and it

would have had a value in 1977. This

would have a value to someone who would

purchase the business.

MR. FORMAN: I object to this.

He's already trying to recover future

earnings, and now he's going to try to

capitalize future earnings at some arbi-

trary date.

THE COURT: Overrule the objection,

Q. I'm interested right now in get-

ting your value as to your opinion in

1974. I think you're getting to it. I

just want the value and then we can talk

about how you got it.

171

A. I wanted to go back on that. What

I'm trying to do again is see how much

Payne would have earned or lost over

those next four years, and then the ques-

tion is, what would the value of that

firm have been in 1977, and then try and

discount that back to 1974 values.

(TR. 218]

Q. Okay.

A. So the question is, how much would

this firm be worth in 1977 to a prospec-

tive buyer in the Birmingham market who

wanted to go into business and take over

a going concern which is now profitable

and faced with non-discriminatory rebates

and bonus programs, and what I was assum-

ing then was about a $20,000.00 a year

net profit, that how much is the firm

worth that's makeing [sic] about

$20,000.00 a year, and the answer is we

use a discount figure of ten percent, a

172

conservative figure, and say that the

capitalized value of that firm in 1977

would have been $200,000.00. That's

what a prospective buyer would be willing

to pay to get an income stream of

$20,000.00 a year.

Q. And then you discount that figure

of $200,000.00 back to 1974 dollars?

A. Discount that figure back into

1974 dollars. Now, again I did the

figure of 1978, $200,000.00 in 1978, at

a six percent rate of discount would

discount to a value of $158,400.00 in

1974. If we discount it back from 1977,

the value of that firm would have been

about $170,000.00, and I don't have it

exactly because --

Q. Well, your best judgment.

(TR. 219]

A. -- my calculator battery went

dead.

173

Q. Your best judgment is what we are

interested in. Approximately $170,000.00?

A. Yes.

Q. Do you take into account at that

time -- you said the value as a goind

{sic] concern would be $170,000.00?

A. Yes.

Q. Do you take into account the los-

ses during --

A. Yes.

Q. -- this time?

A. We take into account the losses

and the gains which would have netted out

to a plus $32,000.00.

Q. Oh, I see. The $32,000.00 figure

is taking into account the losses over

the past five years, and the gains over

the next three?

A. Correct.

Q. Okay. So that’s your figure then,

$170,000.00?

174

}

A. He had $32,000.00 worth of net

earnings which offset the losses or the

total would be $32,000.00 in 1974 dollars

plus an additional $170,000.00, and

since these are just rough figures

because of my calculator problem, what

I'm saying is that this method says that

the value of Payne's business in 1974

when he went out of business was r ;ht

around

(TR. 220]

$200,000.00. Now, the first method gave

me $100,000.00 That was $170,000.00 plus

the 32.

Q. Oh, I'm sorry.

A. So it should be about $200,000.00.

So these are the two methods. As I say,

I prefer the second method. I think it's

a more reasonable figure.

Q. Do you think that this method that

I am writing on the board now is the more

175

reasonable method?

A. Yes, that is a more reasonable

method, because it's not based on this

constant gain of value over the twenty

year period between 1955 and 1974.

Q. Now, I want to ask you, you've

been through the methodology and how

economists value companies. Is that

standard in normal practice to value

companies in that method, by that

method?

A. Yes.

Q. And accepted in the practice of

your field?

A. Yes.

Q. I'm sorry, you'll have to speak

A. Oh, yes. Yes, yes, it is.

Q. All right, sir.

MR. FORMAN: Your Honor, I would

like to

176

(TR. 221]

move to strike all of this testimony con-

cerning the going value of the concern

either on the first method or the second

method. It's all based on speculation.

It's one assumption after another. There

is no relation of that to the Birmingham

market, and he says Chrysler may have had

a good year. He doesn't say whether the

Birmingham market is a good market for

Chrysler or a poor market for Chrysler.

He in no way relates anything back to

what was happening here in Birmingham.

THE COURT: Overruled.

(TR. 222]

Q. Just one moment, Judge, I think

I'm about through.

Doctor, in your opinion as an

economist, did these rebate programs

that you've studied have a good or an

adverse effect on competition between

177

the four dealers, four Chrysler-Plymouth

dealers in those years?

A. Oh, I think it reduced competi-

tion. I think it was an injury to con-

petition. As I said before, it had a

two-pronged effect. It reduced Payne's

ability to compete, and by reducing

Payne's ability to compete, it reduced

the need for these other companies to

compete as vigorously. So it reduced

the vigor of competition in the

Birmingham market for Chryslers and

Plymouths.

Q. Thank you. Judge, at this time I

would like to offer into evidence the

exhibits that we have used as summaries

of those programs which we had previously

offered. We identified them all in

Dr. Ignatin's testimony.

THE COURT: All right.

MR. FORMAN: Your Honor, we would

178

to object to those, these been no showing,

not even a basic showing that those

dealers are actually in competition, no

showing by this expert that he's

(TR. 223]

made any study along that line.

THE COURT: Overrule the

objection.

CROSS EXAMINATION

(TR. 228]

Q. Dr. Ignatin, is it a fair state-

ment of your testimony that the programs

in which you have concluded that there is

some discrimination, results in some

Aiscrimination of price, are the programs

where you have basically taken the amount

of money which, say, J. Truett Payne

Company made, divided the number of cars

that he sold during the time of that pro-

gram into that figure, and come up with

a payment per unit, and when that payment

179

per unit differs, you have considered

that to be discrimination?

A. Yes. Again, what I did is, I took

the amount of rebate on each car line

group that J. Truett Payne received, and

I divided that by the number of cars that

Payne sold, 4d that gave me the rebate

per unit that Payne got on that car iine

group.

I then went to the other dealers

and took the amount of rebates they got

for each car line group, and divided

that by the number of cars sold in each

car line group, and where there was a

difference, I would then take the dif-

ference in per unit rebate that the other

dealers got, and subtracted what Payne

got on a rebate per unit, and I multi-

plied that by the number of cars sold

(TR. 229]

by Payne, and that was the difference

180

between the two, or what I would call

the difference due to the discrimination,

yes.

Q. Okay. The difference in payment,

and you said that was the discrimination?

A. Yes. There was a difference per

unit in the payment Chrysler made to the

dealers.

(TR. 255]

Q. Dr. Ignatin, I believe you've

testified on your direct examination that

you felt these sales incentive programs

had an adverse effect on competition,

one, in a sense, because J. Truett

Payne's salesmen could not, as you say,

discount, could not discount the price

of the cars?

A. As much as --

Q. As much as the other dealers?

A. Uh huh.

Q. And because you say the other

181

dealers are insulated from competition?

A. Yes, because J. Truett Payne

could not discount their cars as much as

they otherwise could have. This meant

that the other firms did not have to

discount their cars as much as they would

have had to.

Q. You say the effect of this would

be, the price that the ultimate consumer

would have to pay might be slightly

higher?

A. Yes.

Q. Let me ask you this: do you have

any evidence that the other car dealers

discounted their cars more than J. Truett

Payne Company did during the period '7l

through him going out of

(TR. 256]

business, the date he went out of busi-

ness on May 28th, 1974?

A. No, I did not compute that.

182

—

Q. Let me ask you this: if the other

dealers took the incentive money and

simply ran it through the corporation .-

into their pocket, the pocket of the -

principal stockholders, what effect would

that have on J. Truett Payne Company?

A. Well, the fact that Payne did not

get the money to run through to its

stockholders, of course, injured Payne,

but their ability --

Q. It injured the stockholders?

A. Yeah. It would injure the stock-

holders of the Payne corporation, if

they didn't have that money to run

through. But it would also reduce the

ability of the Payne people to compete.

I'm not too sure exactly how you

just run that money through. This rebate

is, in fact, a reduction in the cost of

the car that Chrysler is getting from

these dealers.

183

(TR. 257]

A. The point that I am trying to

make is that exactly what these firms do

with it is not at all clear. The effect

as it hits Payne, however, is that they

get a lessened ability to compete.

Q. I don't understand how they have

a less ability. Let's just say the

dealer pays all the -- let's say Roebuck

A. Uh huh.

Q. -- receives more incentive money,

all of his incentive money is paid to his

salesman as, say, a commission.

A. Uh huh.

Q. The price that they are selling

the car for may not be lowered. How is

that going to have an adverse effect on

J. Truett Payne Company?

A. Well, in that case, if they didn't

lower the price -- of course, the

184

salesman can lower the price. The

ultimate deal is worked out between the

salesman, the sales manager and the

customer,

(TR. 258]

and the salesman in selling the car,

since he's getting more for the car, will

try harder, and one of the methods sales-

man have in the automobile industry of

trying harder is to reduce the aiaount of

commission they make on the car.

A typical salesman might figure

if he sells the car for $5,000 he will

make $500, this is just hypothetical.

If he knocks the price down to forty-

eight hundred dollars he might make only

$400. -Well, he might just want to do

that. And with this extra money coming

in, of course, he's got the ability to

do that and compete, whereas, the Payne

salesman and the Payne Company does not.

185

Q. But in effect if the other company

did not lower their price, the J. Truett

Payne Company is not going to be

adversely affected by competition, isn't

that a fact?

A. Well, if both companies charge the

same price, then the gross profit would

be different per car. And, yes, it would

hurt Payne. They would be getting less

per car than the other company would by

the amount of that difference in rebate,

(TR. 260]

Q. Doctor, when you gave us your

calculations of the goodwill of J. Truett

Payne Company as of May 28, 1974, you

used two methods?

A. Right.

(TR. 261]

Q. The first method, in effect, you

discounted -- well, let's go through

that.

186

A. O.K.

Q. In the first method, you attempted

to determine the goodwill of J. Truett

Payne Company after the merger between

J. Truett Payne Company and Leseur which

occurred in 1955?

A. Right.

Q. And you said that Leseur, in

talking to Mr. Payne, you decided that

Leseur had twenty-two thousand five

hundred dollars of goodwill?

A. Correct.

Q. Did you see any books or anything

to verify this determination?

A. No.

Q. You say you also had to take

Mr. Payne, Mr. Payne's statement that

the goodwill value of his business was

twenty-five thousand dollars?

A. I took that in court. I had

determined from my own conversations

187

with Mr. Payne that his goodwill was on

the order of thirty thousand dollars.

Q. How did you determine that?

A. That was based on his estimate

that his firm was worth about a hundred

thousand dollars, that when he had merged

Leseur into his company or his firm

(TR. 262]

into Leseur, whichever way it went, that

his firm was worth about twice as much

as Leseur's and that he had paid about

twenty-two thousand five hundred for the

goodwill of Leseur. So, I had estimated

that Payne had around thirty thousand

dollars worth of gocdwill in his own

business at the time of the merger. Now,

I understand that in court Mr. Payne had

said about twenty-five thousand dollars.

So, that was about a five thousand dollar

difference between the estimate I had

made and what Mr. Payne himself said in

188

—

court.

Q. You never made any independent

study of any records to verify that

Mr. Payne's company may be worth twenty-

five thousand dollars, did you?

A. No, I did not.

Q. So, what you did, you then totaled

the twenty-five thousand and the twenty-

two thousand five hundred and came to a

figure of forty-seven thousand five hun-

dred dollars which was goodwill value of

the merged company in 1955?

A. Yes, as an estimate, as a bench

mark, as a bench mark to check on the

other method which I find preferable.

(TR. 264]

Q. Let me ask you this. When the

companies were merged, the name of

Leseur was dropped, was it not?

A. Yes.

Q. Don't you believe that would

189

“

eliminate some of the goodwill, if not a

large portion of the goodwill attached to

that company?

A. It might. It would depend on

exactly how the merger was done, the

advertising campaign at the time. As I

understand it, Mr. Payne took over the

Leseur Agency and the location. So,

there would be some -- there's a trade-

off in there also that -- goodwill isn't

based on the name in the sense of the

name. When we use the term name, we're

talking about the reputation of the

dealer, and the question would be did

Payne then acquire the reputation of

Leseur when he acquired the company and

the location.

Q. You have no way of estimating

that, do you?

A. Well, from what he said he paid

for it. Whether he got it was another

190

story. p

Q. Whether it disappeared after he

took over would be a different story?

A. It might and it might not. We

don't assume that it disappears just

because he took over. He paid for it.

He assumed it and then he started

(TR. 265]

dealing. Whether it disappeared, I

don't know.

Q. Well, after you made this initial

assumption that it was forty-seven

thousand five hundred dollars as the

goodwill, and that's what it is, an

assumption, you then took a discount

figure of four percent?

A. Yes. It's not a discount figure

in this case. I increased the value by

four percent per year for the next

twenty years until 1974.

Q. And that was based on an

191

inflation rate and the interest rate?

A. Yes, a combination of the two,

a rough average of the two.

Q. Did you take into any considera-

tion in arriving at the four percent

figure the automobile market during that

period, whether it was good or bad, its

ups and downs?

A. Well, this is one of the reasons

why I don't think this method is all

that good and why I used it as a bench

mark. The market went up and down over

the years. He had some good and bad

years over that twenty year period.

Q. How do you know that?

A. Through talking with him and

seeing some of his financial statements.

(TR. 266]

Q. What financial statements did you

see?

A. I saw them going back to, what,

192

1966, I believe, his profit and loss fig-

ures. I believe it went back to ‘66.

Q. You have nothing between '55 and

A. No, I did not look at them. I

just relied on my conversations with

Mr. Payne.

Q. And-by using this four percent

figure, you determined that the goodwill

of J. Truett Payne Company on May 28,

1974, was a hundred thousand? Is that

your --

A. I don't have my calculator. The

figure I have is a hundred fifteen thou-

sand based on the fifty-two thousand five

hundred that I had done previously.

Forty-seven thousand five hundred times

four percent per year for twenty years

ought to come out to around a hundred

thousand.

Q. So, to get --

A. About a hundred and two thousand.

193

. ~

I saw somebody doing the figure. I would

guess around a hundred and two thousand.

Q. And you used this as a bench mark

to verify your next figure; is that right?

A. Yes, to see how my next figure

comes out.

Q. Your next method, your second

method really

(TR. 267]

consists of trying to specula

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