Appendix — McClure v. Undersea Industries, Inc.

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APPENDIX A

UNITED STATES COURT OF APPEALS

ELEVENTH CIRCUIT

No. 80-7488

CLIFTON M. MCCLURE,

Plaintiff-Appellee,

v.

UNDERSAA INDUSTRIES, ING., a corporation d/b/a

SCUBAPRO AND JOHNSON DIVERSIFIED, INC., a corporation,

Defendant-Appellant.

March 29, 1982

Appeal from the United States District Court

for the Northern District of Alabama

Before MORGAN, KRAVITCH and HENDERSON,

Circuit Judges.

HENDERSON, Circuit Judge:

Undersea Industries, Inc. (USI), appeals from an ad-

verse jury verdict in an antitrust action initiated by the

appellee, Clifton M. McClure. We conclude that the briefs

and the record do not support the claim that McClure

was injured as a result of the alleged boycott conspiracy,

and, thus, we reverse.

The appellee, Clifton McClure, is a retail distributor

of scuba diving equipment. He owns and operates a pro-

fessional dive shop in Huntsville, Alabama, under the

name of Aquaspace. He is assisted in this effort by his

wife, Bobbie McClure. The appellant, USI, is a manu-

facturer of diving equipment marketed under the name,

Scubapro. Those selected as dealers are authorized to sell,

repair and service Scubapro products. McClure’s applica-

2a

tion for Scubapro authorization was granted in 1968 and

he began to buy equipment directly from the USI Cali-

fornia factory. For the next several years, McClure made

substantial purchases from USI. It was not until 1976

and 1977 that he decreased his procurement of diving

apparatus from the appellant.

In 1975, McClure became involved in developing a new

diving equipment manufacturing company called Sub

Aquatic Systems (SAS). He carried both SAS and Scu-

bapro products in his Huntsville store. In 1976 and 1977,

the relationship between McClure and USI deteriorated

and in June, 1977, USI management terminated McClure

as an authorized dealer of Scubapro products. This can-

cellation meant that McClure could no longer purchase

equipment directly from the Scubapro factory nor could

he offer to his customers the full benefits of USI’s war-

ranty program. Under this warranty system, any repair

work performed by an unauthorized dealer voided the

warranty to the consumer and consequently, customers

who purchased from unauthorized dealers were, at times,

referred by the company to authorized dealer for service.

Also, it was more difficult for an unauthorized dealer to

secure spare parts or manufacturer’s manuals on repair.

Soon after McClure received word of his termination,

he made arrangements to purchase Scubapro equipment

from two authorized dealers. Over the next few months,

he purchased equipment from several dealer sources and

had offers from other dealers to sell him any Scubapro

equipment he required. However, in December 1977 and

January, 1978, the appellee did contact several authorized

dealers who refused to sell to him. Then, on February 2,

1978, McClure filed this lawsuit against USI.'

The complaint principally charged: (1) that USI termi-

nated McClure’s dealership as part of a conspiracy to

1The original complaint also named USI’s parent corporation

as a defendant, but the action against the parent was dismissed

on July 28, 1978.

restrain trade, prevent competition and monopolize the

scuba equipment industry, 15 U.S.C. §§1, 2; (2) that

USI engaged in a conspiracy to restrain trade by fixing

prices and maintaining illegal territorial policies, 15 U.S.C.

§1; and (8) that the appellant and certain authorized

dealers conspired to boycott McClure by refusing to sell

him Scubapro equipment after his termination, 15 U.S.C.

§1. Record at 2. The case came on for trial and, after

the close of the plaintiff’s evidence, the district court

granted USI’s motion for a directed verdict on the mo-

nopolization and price fixing causes of action. Trial

Transcript at 2535-7 (hereinafter cited as T.R.). The de-

fendant’s motion for a directed verdict on the boycott

conspiracy charged was overruled, and the trial proceeded

on this claim only. After the close of all the evidence, the

court denied USI’s renewed motion for a directed ver-

dict. The jury returned a verdict in favor of McClure

for $20,000.00 single damages, and the court awarded

attorney’s fees of $85,000.00. Thus, judgment was en-

tered against USI in the total amount of $145,000.00.

USI’s motion for a judgment notwithstanding the verdict

or a new trial was denied, and USI subsequently lodged

this appeal.

McClure alleges that USI violated § 1 of the Sherman

Antitrust Act, 15 U.S.C. §1, by entering into a post-

termination conspiracy to boycott his purchase of Scuba-

pro equipment. However, “before a Sherman Act viola-

tion becomes cognizable as a private civil remedy,” li-

ability must be established under § 4 of the Clayton Act,

15 U.S.C. §15. Alabama v. Blue Bird Body Co., Inc.,

573 F.2d 309, 317 (5th Cir. 1978). Section 4 of the

Clayton Act provides that a private party “who shall be

injured in his business or property” due to an antitrust

violation may recover treble damages plus costs and at-

torney’s fees. 15 U.S.C. § 15. Hence, [pl roof of a viola-

tion of the Sherman Act standing alone does not establish

civil liability ....” Blue Bird, 578 F.2d at 317. Under

§ 4 of the Clayton Act, a private litigant must prove, in

4a

addition to an antitrust violation, “an injury to his busi-

ness resulting from the defendant’s wrongful actions,” or

the “fact of damage,” and “some indication of the amount

of damage done.” 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). See also

Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S.

100, 114 n.9, 89 g. Ct. 1562, 1571, 23 L.Ed.2d 129, 143

n.9 (1969). The term “fact of damage” refers to causa-

tion and simply means “that the antitrust violation caused

injury to the antitrust plaintiff.” Blue Bird, 573 F.2d at

317. The “fact of damage“ is a sufficiency of the evidence

question and cannot be based on mere speculation. Blue

Bird, 573 F. ad at 317; Shumate & Co., Inc. v. National

Association of Securities Dealers, Inc., 509 F.2d 147, 152

(5th Cir.), cert. denied, 423 U.S. 868, 96 S.Ct. 131, 46

L.Ed.2d 97 (1975). Although the defendant’s illegal con-

duct need not be the sole cause of any alleged injury, the

plaintiff must prove, “as a matter of fact and with a

fair degree of certainty, that the defendant’s illegal con-

duct materially contributed to the injury.” Terrell, 494

F.2d at 20. See Blue Bird, 578 F. ad at 317.

As the Fifth Circuit Court of Appeals stated in Shu-

mate & Co., Inc., 509 F.2d at 152, “injury is the sine

qua non for stating a cause of action” based on an anti-

trust conspiracy. Accordingly, we must initially deter-

mine if the evidence supports the claim that McClure’s

business suffered injury as a result of the purported boy-

cott conspiracy. Before reaching this issue, attention

should be directed to the exact posture of the case as it is

before our court. As pointed out above, the district court

directed a verdict on the claims of attempted monopoliza-

tion and price fixing. The judge stated:

Therefore, the Court concludes that the claim of

attempted monopolization fails under the evidence

presented by the plaintiff, and that the defendant is

entitled to a directed verdict of that claim advanced

in Count II of the complaint.

5a

With respect to the claim that defendant termi-

nated the plaintiff as an authorized Scubapro dealer

as part of a conspiracy to restrain trade, the Court

is of the opinion that that claim is not supported

by the credible evidence in the case. More particu-

larly, the Court is impressed that if there were any

evidence to support an inference that the defendant

was guilty of a conspiracy to fix prices, there is a

complete absence of any evidence that the plaintiff

was injured in his business thereby.

Therefore, the Court holds that the defendant is

entitled to a directed verdict with respect to the claim

advanced in Count I of the complaint.

T.R. at 2535-6. Therefore, this appeal does not involve

the legality or illegality of McClure’s termination or any

injury resulting from that termination. The only dis-

pute on appeal is the evidentiary support for the ex-

istence of a boycott conspiracy after the termination

was effected and the damages flowing from this post-

termination boycott conspiracy. The trial judge stated

the issue in his charge to the jury as follows:

Specifically, the plaintiff claims that the defendant,

U.S.L, entered into a combination or conspiracy in

restraint of trade with various dealers of Scubapro

equipment; in other words, its own dealers, and that

such combination or conspiracy had the effect of boy-

cotting the plaintiff, Mr. McClure, by precluding the

plaintiff from purchasing Scubapro equipment from

other dealers, thereby unreasonably restraining in-

terstate trade and commerce within the sport diving

industry.

T. R. at 8277.

2 Both parties agreed, either in their briefs or at oral argument,

that the conspiracy alleged is the post-termination conduct to boy-

cott McClure’s purchase of Scubapro equipment.

6a

If you find that plaintiff has met its burden of

proof and established every required element of the

claimed or alleged violation, there remains a final ele-

ment which plaintiff must prove before Defendant

U.S.I. may be held liable for any of the charges plain-

tiff has made. You must also be satisfied by a pre-

ponderance of the evidence that the alleged con-

spiracy was material in causing concrete and deter-

minable injury to plaintiff’s business. Plaintiff must

also provide some indication of the amount of dam-

age already done.

T. R. at 3288.

In his brief, McClure evidences a misunderstanding of

the damages issue. He argues that his business was dam-

aged because the Scubapro franchise was cancelled and

emphasizes the loss of sales growing out of this termina-

tion. However, the termination issue was disposed of by

directed verdict in the district court,’ and injury from

the termination is irrelevant on this appeal. Again, we

are only concerned with damages resulting from an al-

leged conspiracy to preclude McClure’s purchase of Scu-

bapro products after the cancellation of his authorization.

Even if McClure was in fact prevented from buying

Scubapro equipment from certain authorized dealers, the

record fails to support a reasonable inference that he was

injured thereby. Soon after his termination in June,

1977, McClure had made arrangements with two au-

thorized dealers, Bill Hardy of San Diego, California, and

Mike Maynard of Little Rock, Arkansas, to buy equip-

ment at dealer cost. T.R. at 667-74, 1311, 2525, defen-

dant’s exhibits 45-47. In the ensuing months, he also pur-

chased equipment at dealer cost from two other authorized

dealers—Kim Stalvey in Nashville, Tennessee, and Donnie

Reece in Fort Worth, Texas. McClure’s supply was un-

interrupted. T.R. 671, 1301-02, 1310-12, 2260. These

The appellee does not appeal the trial judge’s order granting

a directed verdict for USI on the first two claims.

7a

dealers placed no limits on the amount of equipment Me-

Clure could purchase and sold at dealer cost, the price

McClure had paid to the USI factory. T. R. 1311-12, 2260-

61, 2525, defendant’s exhibit 45. In fact, McClure procured

more from these dealers in the latter half of 1977 than

he had purchased from the factory in the first four

months of that year. Defendant’s exhibits 46-47, plain-

tiff’s exhibit 2. Although he purchased from the factory

on a COD basis, after the termination some dealers sold

him equipment on credit or by other financial arrange-

ments of his choice. T. R. 673, 1235-36, 2260-61, defen-

dant’s exhibit 46. Appellee submits no evidence to show

that the shipments from the dealers took longer than from

the factory. In fact, shipments from Bill Hardy in San

Diego required about the same length of time as did

shipments from the USI factory. T.R. 1311, 1236-37,

defendant’s exhibit 82. While stating that they could not

buy all they wanted from the existing dealer sources,

McClure and his wife admitted that several other dealers

had offered to sell them additional Scubapro products.

Nonetheless, these additional offers were never pursued

by the McClures. T.R. 668-70, 1312-13, 1344, 2161-63,

2446, 3120. Thus, McClure was able to purchase Scuba-

pro equipment after the termination on very favorable

terms. He was not injured by the refusal of the few

alleged boycotting dealers to sell equipment. They could

offer him nothing more than the selling dealers were al-

ready providing.

The appellee strenuously asserts that he did suffer

greatly in his business by reason of losing access to Scuba-

pro’s very good warranty program. He attempts to show

that sales and profits were lost as a result of his inability

to offer warranty service or repair. Even if these conten-

tions are true, which are strongly contested by the ap-

pellant,* they are not pertinent to the precise issue on

One dealer-supplier, Mike Maynard, testified that he filled out

the warranty cards for McClure and sent them to the USI factory

8a

appeal. Injury due to a company-promulgated warranty

policy is not related to damage from a conspiracy to boy-

cott McClure’s Scubapro purchases. The denial of war-

ranty access, if indeed it did occur, was dictated by a

restrictive company policy and was effectuated by the

termination of McClure’s Scubapro authorization. A chal-

lenge to the policy itself or the cancellation of the dealer-

ship is the proper method to reach this issue. A decision

between certain authorized dealers and the company to

boycott McClure’s purchases has nothing to do with the

denial of warranty services. The alleged boycotting deal-

ers could not offer McClure any individual warranty pro-

tection. If, in fact, they had all sold products to McClure,

his situation with respect to the warranty would have

been no different. Only a change in company policy or

a re-authorization of McClure as a Scubapro dealer could

have reversed or prevented the injury. There is a com-

plete absence of evidence, other than McClure’s and his

wife’s own allegations, to infer injury specifically from

the alleged boycotting dealers’ refusal to sell. There is

no evidence showing the fact or the amount of damage

from his inability to procure certain products or from

inconveniences in the shipping or credit arrangements

available to McClure after the termination. Accordingly,

since the evidence fails to support a reasonable inference

of injury, the jury verdict must be reversed. See Fairley

v. American Hoist & Derrick Co., 640 F.2d 679, 681 (5th

Cir. 1981) ; Shumate & Co., 509 F.2d at 153-55. In view

of this conclusion, there is no need to review the appel-

lant’s other assignments of error.

The judgment of the district court denying the appel-

lant’s motion for judgment notwithstanding the verdict is

REVERSED.

in his, Maynard’s, own name. T.R. 2527-28. Also, Dick Bonin,

the president of USI, testified that unauthorized dealers may repair

the Scubapro regulators without jeopardizing the warranty. T.R. at

3060-65.

9a

APPENDIX B

UNITED STATES COURT OF APPEALS

ELEVENTH CIRCUIT

No. 80-7488

CLIFTON M. MCCLURE,

Plaintiff-Appellee,

V.

UNDERSEA INDUSTRIES, INC., a corporation d/b/a

SCUBAPRO AND JOHNSON DIVERSIFIED, INC., a corporation,

Defendant-A ppellant.

Sept. 17, 1982

Appeal from the United States District Court

for the Northern District of Alabama

Before MORGAN, KRAVITCH and HENDERSON,

Circuit Judges.

ON PETITION FOR REHEARING AND

SUGGESTION FOR REHEARING EN BANC

PER CURIAM:

Our original opinion in this case appears at 671 F.2d

1287 (11th Cir. 1982). There, we reversed a jury ver-

dict in favor of the plaintiff-appellee, Clifton M. McClure.

On petition for rehearing, we have carefully considered

each of the arguments raised by McClure and adhere to

our original opinion, with the following clarification.

We reiterate that a private antitrust plaintiff must

prove injury caused by an antitrust violation in order to

recover treble damages under § 4 of the Clayton Act 15

U.S.C. § 15. This requirement is written into the very

10a

language of §4, which expressly limits the individual

treble damage remedy to those private plaintiffs who suf-

fer injury to business or property “by reason of” an anti-

trust violation. Id. After a search of the record in this

case, we find no evidence at all which discloses that Me-

Clure was injured by an alleged post-termination boycott

conspiracy. McClure’s claims of price fixing, monopoliza-

tion, and illegal termination as an authorized Scubapro

dealer are not before us. The only issue here is Me-

Clure’s charge that he was prevented from purchasing

USI equipment after his termination as a result of a

boycott conspiracy. The record clearly shows that Mc-

Clure could and did in fact purchase Scubapro equip-

ment after his termination at very favorable terms.

Thus, the prerequisite causal connection between any al-

leged violation and injury is absent. McClure’s assertions

of injury all relate to the termination of his franchise,

not to the post-termination boycott conspiracy. As em-

phasized in our original opinion, the distinction between

the damage claims for these two separate causes of ac-

tion is crucial to an understanding of the decision. See

671 F.2d at 1290-91.

Since we find no evidence of any injury resulting

from the alleged boycott, and since the causal connection

mandated by §4 is non-existent, we do not feel that

J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S.

557, 101 S.Ct. 1923, 68 L.Ed.2d 442 (1982), requires a

ruling on the substantive violation. It is obvious to us

that even assuming the existence of an alleged boycott

conspiracy, it was totally ineffective because there was

no injury to McClure. Under these circumstances, a sub-

stantive ruling would serve no useful purpose. See Kypta

v. McDonald’s Corp., 671 F.2d 1282 (11th Cir. 1982)

(post-Payne case affirming summary judgment for anti-

trust defendant because, assuming a violation existed,

plaintiff had not proved that he suffered any injury as a

result thereof). In Payne, the appellate court found no

lla

substantial evidence of injury to the plaintiff—aere, we

find no evidence at all. Also, the question in Payne was

the “appropriate measure of damages” in a private treble

damage suit based on the Robinson-Patman Act, 15 U.S.C.

§18(a). Payne, 451 U.S. at 559, 101 S.Ct. at 1925, 68

L.Ed.2d at 446. In McClure, the question was not the

measure of damages, but proof of the essential element of

a private treble damage suit—the causation of injury in

fact. Cf. Jot-Em-Down Store (JEDS), Inc. v. Cotter &

Co., 651 F.2d 245 (5th Cir. 1981) (appellate court re-

manded for a substantive ruling because district judge

directed a verdict without stating any reasons).

For the foregoing reasons, the petition for rehearing

is DENIED. No member of this panel and no judge in

regular active service on the court having requested that

the court be polled on rehearing en bane (Rule 35, Fed.

R.App.P.; Eleventh Circuit Rule 26), the suggestion for

rehearing en bune is DENIED.

12a

APPENDIX C

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

NORTHEASTERN DIVISION

Civil Action No. 78-L-5021-NE

CLIFTON M. MCCLURE,

Plaintiff

vs.

UNDERSEA INDUSTRIES, INC.,

a corporation doing business as SCUBAPRO,

Defendant

[Filed May 30, 1980]

ORDER

This cause, coming on to be heard, was submitted upon

the motion filed in behalf of defendant for a judgment

notwithstanding the verdict of the jury, or in the alterna-

tive, for a new trial, filed herein on the 28 day of Feb-

ruary, 1980. By stipulation of counsel, such motion is

deemed to have been refiled upon the date of the entry

of final judgment herein. Upon consideration of such

motion and the excellent brief in support thereof, the

Court is of the opinion that such motion is due to be

denied.

It is accordingly ORDERED, ADJUDGED and DE-

CREED by the Court that such motion be and the same

is hereby overruled and denied.

DONE this 29th day of May, 1980.

/s/ Seybourn H. Lynne

Senior Judge

18a

APPENDIX D

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

NORTHEASTERN DIVISION

Civil Action No. 78-L-5021-NE

CLIFTON M. MCCLURE,

Plaintiff

vs.

UNDERSEA INDUSTRIES, INC.,

a corporation doing business as SCUBAPRO,

Defendant

[Filed May 30, 1980]

JUDGMENT

On the 22nd day of February, 1980, the jury having

returned a verdict in favor of the plaintiff, Clifton M.

McClure, against the defendant, Undersea Industries,

Inc., in the amount of $20,000, pursuant to the provisions

of 15 U.S.C. §15, such amount is trebled to arrive at

the sum of $60,000.

It is therefore ORDERED, ADJUDGED and DE-

CREED by the Court that plaintiff, Clifton M. McClure,

have and recover of defendant, Undersea Industries, Inc.,

the sum of SIXTY THOUSAND DOLLARS, together

with a reasonable attorney’s fee in the amount of

EIGHTY-FIVE THOUSAND DOLLARS, or a total of

ONE HUNDRED FORTY-FIVE THOUSAND AND

NO/100 DOLLARS ($145,000), together with the costs

of court incurred herein.

It is further ORDERED by the Court that payment of

the proceeds of the judgment, attorney’s fee and costs

herein shall be made directly to the attorney of record

14

for plaintiff, and upon receipt thereof, such attorney will

satisfy the said judgment on the records of this Court.

DONE this 29th day of May, 1980.

/s/ Seybourn H. Lynne

Senior Judge

15a

APPENDIX E

STATEMENT OF MUTUAL AGREEMENT

Between

SCUBAPRO

and

AUTHORIZED SCUBAPRO DEALER

SCUBAPRO Franchise

Scubapro products are recognized as the criterion of

quality in diving equipment. As such, they are dis-

tributed exclusively through selected, specialized dealers.

A Franchise is awarded to those selected dealers signify-

ing their status as an Authorized Scubapro Dealer. The

foundation of this franchise is an acknowledgement of

responsibilities. Scubapro and the Dealer acknowledge

certain mutual commercial responsibilities. Diving and

diving equipment involve the safety of the individual,

therefore, Scubapro and the Dealer further acknowledge

responsibilities to the consumer. The continuation of this

Franchise is contingent upon the proper performance of

these responsibilities by the Dealer and Scubapro.

Responsibilities of SCUBAPRO

To use discretion in the selection of Dealer.

To select only serious retailers that have the facilities

necessary to provide adequate service to the consumer.

These services include diving ah aga equipment

repair and air refills.

To select only experienced Dealers that have the back-

ground and the experienced personnel to assist the

customer in the selection of safe, proficient equipment.

To select only Dealers that have a professional attitude

and a reputation for ethical business conduct.

16a

To provide any authorized Dealer with the names of other

Scubapro Dealers so that all concerned may know

with whom they are working.

To prevent over- distribution of Scubapro products through

a selective program of dealerships.

To provide adequate information to authorized Dealers on

policies, programs, products and product changes.

To stand behind all factory warranties, guarantees and

product quality standards.

To drop any dealer who adversely effects the reputation

of Scubapro or its other dealers.

To drop any dealer who indiscriminately cuts prices or

who supplies Scubapro products to any unauthorized

store.

Responsibilities of the Dealer

To ensure that buyers of Scubapro equipment such as

regulators, tanks, Automatic Decompression Com-

puters and other safety equipment have had or will

receive proper diving instruction.

Not to sell Scubapro regulators, tanks and other safety

equipment by mail.

To provide consumers with repair and maintenance ser-

vice in keeping with the high quality of Scubapro

products.

To cooperate with Scubapro within the framework of its

warranties and guarantees.

To cooperate with all Scubapro’s legal policies and pro-

grams.

To place the recommendation and prestige of the store

behind the Scubapro product line.

17a

To give proportionate representation to the complete

Scubapro line in stocking and inventory.

To pay Scubapro invoices according to terms.

Not to sell, trade or transfer Scubapro products to any

store other than another authorized Scubapro Dealer

except when permission is given by Scubapro in

advance.

Not to advertise Scubapro products at less than recom-

mended list prices.

To sell Scubapro at the prices suggested in the Scubapro

Catalog and Price List.

To cooperate with price programs avoiding special sales

unless receiving authorization from Scubapro.

To give no special discounts, except in rare individual

cases where sound judgment indicates a valid promo-

tional purpose is served.

Validity

This franchise is effective when signed by the Dealer and

an authorized representative of Scubapro.

This franchise becomes invalid with any change of owner-

ship or change of management of the dealer and may

not be assigned or transferred to another dealer or

management without the consent of Scubapro.

After the effective date of this franchise any subsequent

branches opened by the dealer must be approved by

Scubapro before they sell or display Scubapro

products.

This franchise does not convey, grant or imply any ex-

clusive territorial rights. Scubapro reserves the right

to appoint additional dealers where in the judgment

of Scubapro a valid reason exists.

18a

This Franchise Agreement can be terminated by either

written notice or verbally by the principal officer of the

Dealer or Scubapro when the opposite party is decidedly

in default in their aforementioned responsibilities.

Signed for SCUBAPRO

Signed for DEALER