Petition — Olsen v. Progressive Music Supply, Inc.

Office - Supreme Court, |

82-209” FILED

| PCED EIN © Pe JUN 6 1983

PSE

MEEAANDER L. STEVA

Inthe Supreme Court of the United States 7

OCTOBER TERM, 1982

CLAIR OLSEN and GUITAR CITY STUDIOS, INC.,

a Utah corporation,

Petitioners,

Vs.

PROGRESSIVE Music SUPPLY, INc., NORLIN MUSIC,

INc., formerly CHICAGO MUSICAL INSTRUMENTS,

and PEAVEY ELECTRONICS, INC.,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

TENTH CIRCUIT

LOWELL V. SUMMERHAYS

EDWARD T. WELLS

Counsel of Record

W. ANDREW CLAWSON

SUMMERHAYS, RUNYAN

& MCCLELLAND

420 Continental Bank Bldg.

Salt Lake City, Utah 84101

Attorneys for Petitioners

Inthe Supreme Court of the United States

OCTOBER TERM, 1982

CLAIR OLSEN and GUITAR CITY STUDIOS, INC.,

a Utah corporation,

Petitioners,

VS.

PROGRESSIVE Music SuPPLY, INC., NORLIN MUSIC,

INc., formerly CHICAGO MUSICAL INSTRUMENTS,

and PEAVEY ELECTRONICS, INC.,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

TENTH CIRCUIT

QUESTIONS PRESENTED

1. Is a plaintiff who has submitted substantial evi-

dence on the anti-competitive affect of the defendants

conduct as an exception to the manufacturer’s normal

distribution system coexisting with a proven illegal

conspiracy entitled to have the defendants answer his

evidence or should defendants be allowed to avoid re-

sponding by virture of a 41(b) Motion?

2. Is unfair competition actionable under the anti-

trust laws as an inseparable part of the federal ques-

tion of conspiracy when it was in furtherance of per se

i

illegal combination, and is the trial court required to

make findings of facts on the issues of unfair competi-

tion and award separate damages for the injuries suf-

fered or can such issues be dismissed in silence?

3. Is a plaintiff who has presented a reasonable

damage theory supported by expert testimony and

demonstratable economic evidence entitled to receive

that measure of his damages or can the damages be

reduced by admitted speculation?

4, Will a private litigants proof of a violation of

Section I of the Sherman Act merge with claims of

Section II violations, or is it proper to dismiss the Sec-

tion II claims by separating the evidence of the proven

Section I violations when considering Section II

claims?

DESIGATION OF CORPORATE RELATIONSHIPS

The Guitar City Studios, Inc. filing this petition for

Writ of Certiorari to the Tenth Circuit Court states

that:

1. This is its original designation of corporation;

2. Guitar City Studios, Inc. is not owned by any

present corporation;

3. Guitar City Studios, Inc. does not have an own-

ership interest in any subsidiaries;

4. Guitar City Studios, Inc. does not have any af-

filiates.

ii

TABLE OF CONTENTS

Page

GUMS LIONS PRESENTED .....ncec.cncccccccscccscsesoscscccsspesconcs i

DESIGNATION OF CORPORATE RELATIONSHIPS. © ii

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I TI I I A Ino ns ss cstsevoscecetnee ncccasoancsenmeesoncesice Vv

a So 0 aulbo ks eslaveesalsnbcabvniicbilewowisicbocnl 2

JURISDICTION .................. Ts ee Aeger at he tar ey A IN 2

CONSTITUTIONAL, STATUTES AND RULES ........... 2

ope eg 2) 4. i le So 4 oF || rr 3-6

REASON FOR GRANTING THE WRIT......................... 6

SUMMARY OF THE ARGUMENT .........0000.000000.. 7

ARGUMENT

PoINtTI THE CIRCUIT COURT ERRED IN AFF-

FIRMING THE DISMISSAL OF PEAVEY

ST TMEEIEIEEY, cxccccdetbatdtriicdtannditiens’ - satndmocas

A. Group Boycott Under Klors....................... 8

B. Petitioner Met His Burden Under

SRR etre alee NOE eine ae tees 11

C. Dismembering The Conspiracy ................. 12

PoIntTII UNFAIR COMPETITION AND THE

PS peg y ty gh | | Sa e eng enen Renee none 13

A. Are Acts of Unfair Competition Action-

able Under The Antitrust Laws’?.............

B. Are Trade Name Infringements And

Unfair Competition An Inseparable

Part Of The federal Question ?................. 17

Point III DAMAGES WERE REDUCED BY

EE I 0h. cel coacclta ends ioe) culate ecpialincticnse 19

PoINTIV THE LOWER COURTS ERRED IN DIS-

MISSING THE SHERMAN ACT SEC-

I Or SEMEN ons sacs cnccacessenstinaancocntsomciaantonns 22

co eee OEE ERL EP

APPENDIX A ......... clade baeevaita Sadeealsieladkenidieabistabbriia ecaaiie la

OM es te ak aantpenantataieteanianniale 2la

TABLE OF CONTENTS

Page

I TE iia ciate ctiptancdeianaacedsk-cumdehenienenanaeinaaneshctalianesLevsewden 43a

IR ID oc sthcsea inch tos sce dann cas vabdabasadensacammiverinnten 49a

I IF Uc ee I PS OG onic cescicvencnnovessesedecsevncvonssoes 5la

TABLE OF CASES

Albert Pick Barth v. Mitchel Woodbury Corp., 57 F.2d.

96 (1st Cir. cert denied, 286 U.S. 552) (1982)........... 15

Albrecht v. Herald, 452 F.2d 124 (8th Cir. 1971) ....00000...... 22

Atlantic Heel Co. v. Allied Heel Co., 284 F.2d 879

en UI a sass gunnnaloacdomanetie 15

Bigelow v. RKO Pictures, Inc., 327 U.S. 251 (1946) ....... 19

Big O Tires v. Goodyear Tire & Rubber Co., 561 F.2d

EE MI ET io isi rc ic ncaa acclabiacetneneomabcaiinensahant 18

Bluebell Refining Co. v. Frontier Refining Co., 213 F.2d

a ros sass bobiiakabiniomiehes 18

Cadillac Overall Supply Co. v. United States, 568 F.2d

SI I I a asda a canta ioe 8,12

Cherokee Laboratories, Inc. v. Rotary Drilling Services,

BE ae WE COUN GRBs ROWED wivicesesccecsessncseucedercsecsnexens 15

ComTel v. Dukane Corp., 669 F.2d 404 (6th 1982) _......... 10

Continental T.V. v. GTE Sylvania, 433, U.S. 36 (1977)... 7

Continental Ore v. Union Carbide, 370 U.S. 690 (1962)... 7

Eastman Kodak Co. v. Southern Photo Materials Co.,

SE I A i cans iatcecgiehcncnatiiangeok Passim

os —e v. Lysfjord, 246 F.2d 368 (2nd Cir.

ARES RCo KT DRE TR pele Mons aed SPEC I EE 19

Hurn v. Oursler, 289 U.S. 288 (1982) .....0.eee eee 17

Klors v. Broadway Hale Stores, 359 U.S. 207 (1959)....... 7

Lessig v. Tidewater Oil Co., 327 F.2d 459

EIA TIE nestesadstactchoat oesonciehsecidendsisabiansatsvabimtronesixaiscaes 25

Moore v. New York Cotton Exchange, 270 U.S. 593

a ICERIESe Se sel ISS ERE Dv be iar IRS cet ny a 17

Morton Salt v. Royal Crystal Salt, 235 F.2d 573

IY a cauambabvusbibaccoupie 8

TABLE OF CONTENTS

Page

Norville v. Globe Oil and Refining Co., 303 F.2d 281

PU I SUED acesnessnactukescdeenecpcciadcnae ade a aemementel

Northwest Power Products, Inc. v. Omark Industries, Inc.,

Ga: 726 BS. Ce Ca. STO ccd

Parmalee Transportation Co. v. Keeshin, 292 F.2d

WU CORE es BED ce eocecsnccdi cise emenin 15

Perrington Wholesale, Inc. v. Pioneer Dist. Co. of

Kansas, 353 F.2d 618 (10th Cir. 1965) 2000202... 15

Smith v. Dravo Corp., 208 F.2d 388 (7th Cir. 1953)......... 13

Smith Klein Corp. v. Eli Lily & Co., 575 F.2d 1056

CBee Cor. cart. Gimmie TOT) acess ec cescerciccccwecicionns

United States v. Griffiths, 334 U.S. 100 (1948) 2.00200... 24

United States v. International Salt, 332 U.S. 392 (1947). 25

United States v. Swift, 196 U.S. 375 (1905) 2.002 .. 23

Walker Process Equipment, Inc. v. Food Machinery and

Chemical Corp., 382 U.S. 172 (1965) ....................... 25

William Goldman Theaters, Inc. v. Lowe’s Inc., 164

F.2d 1021 (3rd Cir.) cert denied, 334 U.S. 811 (1946) 19

Zenith Radio Corp. v. Hazeltyne Research, 395 U.S.

DOD CID ehicicsncccecciaeniccnccseiacsnieescesecnbaienbeaiasyabestataansin 19

TABLE OF AUTHORITIES

United States Constitution, 5th Amendment ................... 19

United States Constitution, 14th Amendment ................... 19

Sherman Act, §§$ 1 and 2, 15 U.S.C. §§ 1 and 2........... 2

Lanham Trade Mark Act. § 43(a), 15 U.S.C. 1125 (a)..... 2, 18

FF A. ips vince inaniicnacnschentsinmniiicegentasaiianetapamamaiaae 2,17

Wr Te: Cae, GD CY ascitic eset 2,18

Baal Ti Gas Be RD csi si cases aviennicencieeaeia 12

NE Ts Fv GID cacercicnviccctenctce enn 2,18

Boston College Industrial and Commercial Law Review

0 le A MRT ett 16

Kintner Federal Antitrust Law (1980) ........20000000000022..2.-- 23

United States Attorney General’s National Committee

to Study the Antitrust Laws (1955) —.0000000... 23

Von Kalinowsky Anti Trust Laws and Regulations,

RD QHD escetiaeccbisecenceeoteenatennenneainns 20

I

In the Suprenw Court of the United States

OCTOBER TERM, 1982

CLAIR OLSEN and GUITAR CITY STUDIOS, INC.,

a Utah corporation,

Petitioners,

Us.

PROGRESSIVE Music SuPPLY, INC., NORLIN MUSIC,

INc., formerly CHICAGO MUSICAL INSTRUMENTS,

and PEAVEY ELECTRONICS, INC.,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

TENTH CIRCUIT

To the Honorable Warrea Burger, Chief Justice of the

Supreme Court and the Honorable Justices of the

Supreme Court of the United States.

The above-named petitioners respectfully pray that

a Writ of Certiorari be issued to review the judgment

in the United States Court of Appeals for the Tenth

Circuit entered in the ahove-entitled cause affirming

the judgment of the United States District Court for

the District of Utah, which was entered in said Court

of Appeals in Case No. 82-1357 and 82-1400 on March

8, 1983.

2

OPINIONS BELOW

The opinion of the Court of Appeals that was en-

tered on March 8, 1983, is unreported at the date of

the printing of this petition, but is reproduced in Ap-

pendix A. The opinion of the United States District

Court for the District of Utah is reported at 1982-2

Trade Cases 64,928 (D. Utah, 1981) and is repro-

duced in Appendix B.

JURISDICTION

The judgment of the Court of Appeals affirming

the judgment of the District Court was entered on

March 8, 1983, and has not been reported as of the

date of the printing of this petition. Jurisdiction of

this Court is invoked under 28 U.S.C. 1254 (1). On

June 3, 1983, time for filing was extended to June 29,

1983 (A-968).

CONSTITUTIONAL PROVISIONS, STATUTES,

AND RULES INVOLVED

This petition involves the following constitutional

provisions, statutes and Federal Rules of Civil Pro-

cedure:

1. The 5th Amendment to the Constitution of the

United States.

2. The 14th Amendment to the Constitution of the

United States.

3. Sherman Act §§1 and 2 15 U.S.C. §$1 and 2.

4, Lanham Trade Mark Act §48(a) 15 U.S.C.

§1125 (a).

5. 15 U.S.C. §1338 (b).

ie

Rule 8(e) [2] Federal Rules of Civil Procedure.

~~]

.

Rule 41(b) Federal Rules of Civil Procedure.

8. Rule 52(a) Federal Rules of Civil Procedure.

which are reproduced in Appendix C.

STATEMENT OF THE CASE

The petitioners sued the respondents and others un-

der $§1 and 2 of the Sherman Act 15 U.S.C. §§$1 and

2 (hereinafter the Sherman Act) seeking treble dam-

ages under $4 of the Clayton Act 15 U.S.C. 18(e).

This lawsuit arises out of factual situations includ-

ing price-fixing, boycott, refusals to deal to protect

the price-fix, and unfair competition.

The purpose of the conspiracy was to protect Pro-

gressive’s price-fix and to destroy competition in the

state of Utah in the line of musical equipment known

as Frets Electronics and Percussion (hereinafter

(FEP). This purpose was accomplished by Progres-

sive conspiring with the defendant manufacturers to

boycott Olsen and other dealers, refusing to deal with

Olsen and other dealers to protect the price-fix, engag-

ing in acts of territorialization trade name infringe-

ment and other acts of unfair competition driving all

other competitors out of the business in order to pro-

tect the price-fix specifically proven as to CBS Instru-

ments.

The acts of unfair competition included trade name

infringement, inducement of the petitioner’s employees

to work for the defendant Progressive in the price-fix,

the taking over of the petitioner’s store locations and

4

customers, the unauthorized use of petitioner’s trade

name secrets (copyrighted music), and the transfer of

franchises.

During the time the conspiracy was in effect, there

was little or no competition with the CBS complete

line of quality instruments.

Named as defendants in petitioner’s complaint and

amended complaint are Progressive Music Supply, Inc.

(hereinafter Progressive); Accoustic Control Corp.

(hereinafter Accoustic); Ovation Instruments, Inc.,

a/k/a Kaman Corp., Norlin Music Inc., formerly Chi-

cago Musical Instruments (hereinafter (Norlin) ; CBS

Musical Instruments (a division of CBS, Inc.), (here-

inafter CBS) ; ARP Instruments (hereinafter ARP) ;

and Peavey Electronics Corporation (hereinafter Pea-

vey).

The claims against ARP and CBS have been dis-

missed. Also, Judge Anderson, the trial judge, granted

several of the defendants’ motions to dismiss on behalf

of claims against Norlin, Ovation, and Peavey. Peti-

tioner’s Section 2 Sherman Act claims against Progres-

sive involving attempt and conspiracy to monopolize

were also dismissed. All claims against Accoustic and

Ovation were dismissed prior to appeal leaving de-

fendants, Norlin, Peavey and Progressive in the ap-

peal.

The trial Court found that Progressive had conspired

with CBS and others to restrain trade by fixing prices

in violation of the Sherman Act, but that Olsen as a

direct horizontal competitor suffered no injury as a

result of this conspiracy. The Court also found that

Progresive had violated Section 1 of the Sherman Act

by conspiring to boycott Olsen from receiving CBS pro-

ducts awarding damages of $4,303.00, before trebling,

plus attorney’s fees.

The Appeliate Court affirmed all of the trial courts

findings.

A new cause of action against CBS arising from con-

tinuation of the same claims awaits decision at the

10th Circuit Court, No. 82-2398.

In 1964, Petitioner Clair Olsen (hereinafter Olsen)

along with George Best and Earl Reed formed Gui-

tars, Inc., using the trade name Guitar City Studios.

The business was started by purchasing from Bud

Eastman his going profitable business including the

franchises of CBS, Chicago Music Instruments (now

Norlin, Inc.) and Gretch Musical Instruments.

Prior to purchasing the above-mentioned franchises,

Olsen had agreements that each of the manufacturers

would deal. However, after the purchase was com-

pleted CBS refused to deal with petitioner. Olsen

proved at the trial that tne CBS’s refusal to deal was

to protect the price-fix.

The three principals of Guitar, Inc., Olsen, Best and

Reed, operated separate stores on a part-time basis.

However, they had entered into a written contract that

when the gross sales reached $50,000.00 per year they

would all work full-time. The $50,000.00 condition was

never met because of the proven conspiracy.

In 1970, disagreements arose between the principals

of Guitars, Inc., because none could earn a living while

the conspiracy was in effect. This caused a separation

6

of the principals to operate independent stores, retain-

ing the corporate form for administrative purposes.

During the time the conspiracy was in effect, Pro-

gressive Music was the largest combo and electronic

instrument dealer in Utah dealing with all the inde-

pendent manufacturers, exclusively with ARP, Ac-

coustic, CBS, Peavey and on some products with Nor-

lin.

In 1974, Olsen began to operate his store full-time

when equipment to compete with the CBS complete

line came into the market. From 1974 to 1978, Olsen’s

business grew from seven percent (7%) of the size of

Progressive’s business to seventy percent (70% ). The

proven demonstratable economic affect of the consipr-

acy continued in effect until at least 1976. The Trial

Court refused to receive any evidence of damages past

1974 and adopted 1975 as the base year to calculate

damages.

REASONS FOR GRANTING THE WRIT

The most important reason for granting the writ is

that the decision of the Court of Appeals is contrary

to the letter and spirit of the antitrust laws, the Fed-

eral Rules of Civil Procedure, and the basic principles

of modern federal practice articulated by this Court,

and the majority of other Circuits. The area of dis-

pute involves basic questions of fundamental rights

guaranteed by the constitution, antitrust laws, and

federal civil procedure of which the Tenth Circuit is

in conflict with the decisions of the U. S. Supreme

Court and many of the Circuits. This subject has im-

portance to the antitrust practitioner and to this Court

T

in its capacity as overseer of the administration of jus-

tice in the federal court system.

SUMMARY OF THE ARGUMENT

Petitioners Argument will focus on the four ques-

tions presented. In the first part of the Argument Peti-

tioner will discuss the propriety of the lower court’s

dismissing the Defendant manufacturers Norlin and

Peavey, pursuant to Rule 41(b) in lieu of the evidence

showing the anticompetitive effects of the exception

to their normal distribution systems.

Next, Petitoner will focus on the impropriety of the

lower court’s dismissing in silence the unfair compe-

tition claims after commenting that they did impact

unfairly on the Petitioner.

Next, Petitioner will focus on the impropriety of the

lower court’s reducing the damages by mere specula-

tion. Petitioners will then conclude by discussing the

Trial Court dismissing the $2 claims.

ARGUMENT

POINT I

THE CIRCUIT COURT ERRED IN AFFIRMING

THE DISMISSAL OF PEAVEY AND NORLIN.

The Circuit Court’s decision in this case is in conflict

with this Court’s holding in Klors ». Broadway Hale

Stores, 359 U.S. 207 (1959) ; Continental T.V. v. GTE

Sylvania, 433 U.S. 36 (1977) and Continental Ore v.

Union Carbide and Carbon Corp., 370 U.S. 690 (1962).

Also, the decision is in conflict with the Fifth Cireuit

8

in Cadillac Overall Supply Co. v. United States, 568

F. 2d 1078 (5th Cir. 1978), as well as with its own

holding in Morton Salt Co. v. Royal Crystal Salt Co.,

235 F. 2nd 573 (10th Cir. 1956).

The decision in this case is at odds with the above-

mentioned cases in three areas. First, the petitioner

proved a group boycott under Klors, supra, and the

court erred in dismissing Norlin and Peavey pursuant

to a 41(b) Motion. Second, petitioner further proved

that the refusals to deal by Peavey and Norlin to grant

Progressive an exclusive dealing, had an anticompeti-

tive effect in the market as required under GTE Syl-

vania, supra, rule of reason analysis and therefore it

was improper to dismiss Norlin and Peavey on a 41 (b)

Motion. Third, the court’s dismissal of Norlin and Pea-

vey dismembered the conspiracy contrary to this

Court’s holding in Continental Ore, supra. Each of the

above-mentioned areas will be discussed separately.

A. GROUP BOYCOTT UNDER KLORS, SUPRA

In Klors, supra, that court held that an agreement

between a retailer and various manufacturers to ex-

clude a horizontal competitor from receiving certain

products constituted a group boycott that was a per se

violation of the antitrust laws. This court noted in

Klors that the alleged conduct was: “not a case of a

single trader refusing to deal with another, nor even

of a manufacturer and a dealer agreeing to an exclus-

ive distributorship. Alleged in this complaint is a wide

combination consisting of manufacturers distributors

and a retailer.” Id. at 210. The court goes on to state

that the combination took away Klors’ freedom to buy

products in ‘an open competitive market.” Id.

Like Klors, supra, the Petitioner alleged the same

type of conspiracy between a retailer and the various

manufacturers. At trial, the Petitioner submitted the

following evidence establishing the parallel conduct of

the conspitacy which should have precluded the grant-

ing of Norlin and Peavey’s 41(b) Motion.

The evidence showed that Progressive was the larg-

est retailer of FEP in the State of Utah. See, T. Ex.

P-103, Penman Depo. p. 29. Progressive’s business pol-

icy was to be protected from price competition. See,

undisputed testimony T. April 30, 1979, p. 22. The

protection from price competition was achieved by Pro-

gressive’s policy of seeking and obtaining exclusive

dealing agreements with manufacturers Penman Depo.

p. 85 and by cornering the best lines in the trade T.

May 21, 1979, pp. 111-114, to sell at noncompetitive

price. T. Vol. II, p. 249.

Norlin participated in the conspiracy in the follow-

ing manner: It created an exception to its normal dis-

tribution system by granting to Progressive an ex-

clusive on its synthesizeis, Pearl Drum products and

electronic keyboards, in the State of Utah T. Ex. P. 87,

88 and 89, allowing Progressive to sell them at non-

competitive prices above retail.

Norlin eliminated all the competitors on its Pearl

Drum products by refusing to sell to Petitioners and

other dealers, even though Norlin’s own business rec-

ords show that Petitioners were authorized to pur-

chase the drums. See T. Exp. p. 87, 88 and 89; A-12 and

T. Vol. V p. 1190.

As mentioned above, Norlin created an exception to

its normal distribution policy. The Sixth Circuit in

10

Com-Tel, Inc. v. DuKane Corporation, 669 F. 2d 404,

(6th Cir. 1982), based on GTE Sylvania, supra, held

that an exception to the normal distribution policy com-

bined with an anticompetitive effect created a per se

violation of the antitrust laws. Therefore, the fact that

Norlin’s exclusive with Progressive was an exception

and anticompetitive would require a holding that Nor-

lin had violated the antitrust laws.

Peavey participated in the conspiracy in the follow-

ing manner: Peavey granted Progressive an exclusive

to allow Progressive to fix high noncompetitive prices,

Penman Depo. pp. 67 and 109. Peavey would not make

independent decisions to deal but, gave the name to

Progressive to control the price-fixing, Penman Depo.

pp. 88-89.

Peavey agreed with Progressive to stop national ad-

vertising of lower prices so that Progressive could

maintain higher prices. See, T. April 30, 1979, p. 59,

The exclusive between Peavey and Progressive was an

exception to Peavey’s normal distribution system. See,

T. April 30, 1979, pp. 62-63. Like Norlin, this would re-

quire a per se violation pursuant to Com-Tel, Inc.,

supra.

The Petitioner proved that both Norlin and Peavey

participated in the conspiracy in order to protect Pro-

gressive’s price-fix. The Defendants have consistently

tried to characterize their conduct as vertical restric-

tion under GTE Sylvania, supra, requiring a rule of

reason analysis. However, the clear weight of the evi-

dence shows that the purpose of the restraints was to

protect the Progressive price-fix. Therefore, under this

Court’s reasoning in Klors, supra, a per se standard

1]

should have been applied requiring a finding that both

Peavey and Novlin’s parallel conduct established their

participation in the group boycott.

B. PETITIONER MET ITS BURDEN UNDER

GTE SYLVANIA, SUPRA.

Even if this Court rejects the per se argument stated

above, the Circuit Court’s decision is in conflict with

this Court in G7'E Sylvania, supra.

In GTE Sylvania, supra, this Court held that non-

price vertical restriction were to be evaluated under

the rule of reason standard. If the Court were to adopt

the rule of reason standard then the Petitioner would

have to prove the anticompetitive effect in the rele-

vant market, GTE Sylvania, supra.

The demonstrable economic effect showed that both

Peavey’s and Norlin’s exception to their normal distri-

bution system produce an anticompetitive effect in that

they eliminated competition in Utah while competition

flourished in surrounding states as to Peavey, T. April

30, 1979, p. 62-63, T. Exp. p. 87, 88 and 89 as to Norlin.

Progressive’s prices were higher than in surrounding

states, T. Exs. A-1, p. 96, and there was no business

reason for the higher prices, they just raised prices to

whatever they wanted, T. April 30, 1979, pp. 34-36.

As to proving the effect in a relevant market, the

petitioner established the relevant market was profes-

sional instrument as opposed to amateur instrument.

See, Fasiman Kodak Co. v. Southern Photo Material

Co., at 273 U.S. 576 (1927). However, the lower courts

rejected this classification implying that it was im-

12

proper. In this regard, the lower court is in conflict

with Eastman Kodak Co., supra, in which this Court

had no problem with such professional versus ama-

teur classification. For the Trial Court to grant Norlin

and Peavey’s 41(b) Motion in the face of the demon-

strable economic effect without requiring any evidence

as to the reasonableness of the exception to their nor-

mal distribution policy or to even allow inquiry into

what those policies were is to replace the rule of rea-

son analysis with an assumption of reasonableness

rule. Therefore, this Court should grant the Writ of

Certiorari to review this aspect alone.

Furthermore, to allow the dismissal of Norlin and

Peavey pursuant to a 41(b) Motion, the Court “must

consider the evidence in its strongest light in favor of

the party against whom the Motion for a directed ver-

dict is made and must give him the advantage of every

fair and reasonable intendment that the evidence can

justify.” Continental Ore, supra.

C. DISMEMBERING THE CONSPIRACY.

In this case, the Petitioner submitted evidence and

the Court found that Progressive Music conspired to

fix prices. Evidence was also submitted showing that

both Norlin and Peavey joined in that conspiracy by

refusing to deal with the Petitioners in order to protect

the price-fix. The law is clear that it only takes a small

amount of evidence to join a defendant to a proven con-

spiracy. Cadillac Overall Supply, supra; Morton Salt

Co., supra.

Furthermore, by affirming the dismissal of Peavey

and Norlin, the Circuit Court is in conflict with this

Court’s holding in Continental Ore, supra. In Conti-

13

nental Ove, supra, this Court held that the conspiracy

should not be dismembered, but should be viewed as a

whole. by dismissing Peavey and Norlin, the District

Court dismembered the conspiracy which dismember-

ing was arilimed by the Circuit Court in conflict with

Continental Ore, supra.

ARGUMENT

POINT Il

UNFAIR COMPETITION AND THE

ANTITRUST LAWS

At trial the Petitioners presented evidence on sev-

eral aspects of unfair competition in furtherance of a

conspiracy violating the antitrust laws. The unfair

competition consisted of infringement of exact trade

name, inducement of employees to work for Defen-

dants in the price-fixing conspiracy, the take-over of

Petitioner’s store locations, use of Petitioner’s trade

secrets (copyrighted music) and transfer of fran-

chises. While the trial court commented that the trade

name infringement impacted unfairly on the Petition-

ers’ it dismissed the trade name infringement, along

with other unfair competition issues in silence by fail-

ing to make any findings of fact on those issues.

The failure to make findings of fact is clearly erron-

eous pursuant to Rule 52(a) of the lederal Rules of

Civil Procedure and is reversible error. Smith v. Dravo

Corp., 208 F. 2d 388 (7th Cir, 1953). Citing controlling

Supreme Court precedent.

The trial court’s dismissal of the unfair competition

issue in silence leaves one with uncertainty as to what

14

the court’s intentions were concerning those aspects of

the litigation. For the Circuit Court to follow suit by

not addressing the issue only furthers the uncertainty.

The lower court’s failure to address the unfair com-

petition issue creates a strong impression that the

courts considered the unfair competition issues either

did not raise to the level of the federal question or they

are not actionable for damages under the antitrust

laws.

Like the District Court, the Circuit Court failed to

address the issue of unfair competition. The Circuit

Court’s failure to specifically address the issue places

it in conflict with the other circuits holding that a

failure to make finding is reversible error. Smith v.

Dravo Corp., supra.

Furthermore, the Circuit Court’s failure to address

the issue and in effect dismissing it again in silence,

raises the uncertainty issue. The Petitioners will ad-

dress the above mentioned uncertainty as follows:

A. ARE ACTS OF UNFAIR COMPETITION

ACTIONABLE UNDER THE ANTITRUST

LAWS?

If we are to assume that by dismissing in silence the

trade name infringement and unfair competition the

court was making a statement that those issues are

not actionable under §1 of the Sherman Act. The Tenth

Circuit Court has then stepped into the middle of the

significant raging conflict between the circuits which

then compels this Court to hear this case in order to

resolve the dispute.

15

A review of the case law shows that two views have

been adopted among the circuits that have decided the

issue of unfair competition being actionable under the

antitruct 'ev's. First, the so-called “narrow view” fol-

lowed in c.e Seventh Circuit that unfair competition

is not actionable under the antitrust laws, Norville v.

Globe Oil and Pefining Co., 308 F. 2d 281 (7th Cir.

1962) (affirming the dismissal of the complaint in

alleging unfair competition as violation of §1 of the

Sherman Act) and Parmelee Transportation Co. v.

Keeshin, 292 F. 24 794 (7th Cir. 1961) (finding no

antitrust violation whee various acts of unfair com-

petition were engaged in, including the bribing of pub-

lic officials). The second view, the so-called “broad

view” followed by the First, Third and Fifth Circuits,

and formerly the Tenth Circuit, that unfair competi-

tion is actionable for damages under the antitrust laws.

See Albert Pick Barth v. Mitchell Woodbury Corp., 57

F. 2d 96 (1st Cir.) cert. denied, 286 U.S. 552 (1932)

(holding that conspiracies involving unfair trade prac-

tices establish a per se violation). Atlantic Heel Co. v.

Allied Hecl Co., 284 F. 2d 879 (1st Cir. 1960); Per-

rington Wholesale, Inc. «. Pioneer Dist. Co. of Kansas,

353 F.2d 618 (10th Cir. 1965) ; Northwest Power Pro-

ducts, Inc. v. Omark Industries, Inc., 576 F. 2d 83

(5th Cir. 1978) and Cheiolee Laboratories, Inc. v. Ro-

tary Drilling Services, 383 F. 2d 97 (5th Cir. 1967).

All of the cases mentioned under the “broad view”

hold that there is a cause of action under §1 of the

Sherman Act for unfair competition. However, there

still is some uncertainty and conflict between whether

a per se standard is to be applied or rule of reason

approach is to be used. See Atlantic Heel Co. v. Allied

16

Heel Co., supra, a First Circuit case as opposed to

Northwest Power Products, Inc. v. Omark Industries,

Inc., supra, a Fifth Circuit case.

In any event, the one thing that is clear is that there

is a considerable amount of uncertainty and conflict

between the circuits with little guidance from this

Court as to whether or not unfair competition is ac-

tionable under the antitrust laws and as to what stan-

dards should be used. As pointed out in 18 Boston Col-

lege Industrial and Commercial Law Review, p. 239

at 274:

Pick Barth and its progeny, pro and con, have

been with us for more than four decades. The

courts have, however, failed to develop a sound

and uniform approach to the issues raised by the

cases, to the contrary in many instances they have

adopted rather arbitrary positions which are in-

consistent with federal antitrust policy.

(Emphasis added.) Also, as pointed out in Northwest

Power, supra: “Even if we were to adopt the law of

the forum state, the cases defining unfair competition

are likely to be in noticeable disarray.” (Emphasis add-

ed.)

The controversy whether unfair competition is ac-

tionable under the anti-trust laws has not been resolved

at the time of filing this appeal. See J. McCarthy,

Trade Marks and Unfair Competition, Vol. 1 Pocket

Supplement 1982 §§ 1-3, 1-9, and 1-14 and cases cited.

Due to the great uncertainty over the question whe-

ther unfair trade practices are actionable under the

antitrust laws, it is imperative that this Court exer-

cise its discretion and grant the Writ of Certiorari to

17

review the decision of the Circuit Court to solve the

controversy. The following questions require this Court

to render an answer:

1. Is uncair competition actionable in the Federal

Court under the antitrust laws? If so, which standard

should be applied?

2. Is there a federal law of unfair competition? If

so, what is the extent of its jurisdiction?

3. Specifically with regard to the case above, is the

infringement of a direct competitor’s trade name in

the furtherance of a proven per se illegal conspiracy

actionable for damage? If so, what are the measures

of damages and should the per se rule be applied to

that issue?

B. ARE TRADE NAME INFRINGEMENTS

AND UNFAIR COMPETITION AN

INSEPARABLE PART OF THE FEDERAL

QUESTION?

If we are to accept the Court’s dismissal of this

issue in silence, it leads to the conclusion that the lower

courts felt that the trade name infringement and other

unfair competition issues are not part of the federal

question. The decision of the Circuit Court is clearly

in conflict with this Court’s holding in Hurn v Ours-

ler, 289 U.S. 238 (1932) in 28 U.S.C. 13888(b) and

Moore v. New York Cotton Exchange, 270 U.S. 598

(1926) cited in Hurn, supra, as to antitrust (which

holds that the federal courts do have jurisdiction over

unfair competition claims even after the federal claim

has been dismissed), and also with the Circuit Court’s

18

own holding in Big “O” Tires v. Goodyear Tire & Rub-

ber Co., 561 F. 2d 1365 (10th Cir. 1977).

Therefore, this Court should grant the Writ of Cer-

tiorari because it is clear that our Circuit Court is out

of line with the rest of the federal courts.

C. DENIAL OF DUE PROCESS.

Furthermore, the Tenth Circuit’s dismissal in si-

lence of the unfair competition is a fundamental denial

of due process to the Petitioner in this case. Federal

Rules of Civil Procedure 8(e) (2) provides that Plain-

tiff is entitled to as many causes of action as he has.

Federal Rules of Civil Procedure 52(a) provides that

in cases tried by the Court, it is required that the Court

make findings of facts and not dismiss the issues in

silence.

In this case, Petitioner put forth evidence that the

Respondent/Defendant Progressive Music infringed

Petitioner’s exact trade name as part of the conspiracy

to violate the antitrust laws and to drive Petitioner out

of business. It is well settled that infringement is ac-

tionable for damages even in cases of similarity of in-

fringement. Bluebell Refining Co. v. Frontier Refining

Co., 213 F. 2d 354 (10th Cir. 1954). More recently the

Tenth Circuit Court has also held that the Lanham

Trade-Mark Act §43 (a) 15 U.S.A. §1125(a) pro-

tects even trade name infringement where there is not

a registered trademark but only a common law trade-

mark. In Big “O” Tire Co. v. Goodyear Tire Co., 561

F. 2d 1365 (10th Cir. 1977), the law being clear that

the trade name infringement is an actionable cause of

damage. For the lower courts to dismiss the issue in

silence by failing to make findings of fact on the issue

19

presents a clear question of the Petitioner being de-

nied due process of law guaranteed by the Fifth and

Fourteenth Amendments. Such denial of due process

mandates that this Court should grant the Writ of

Certiora:i and reverse the Circuit and District Court’s

on that issue alone so that the substantial rights of

Petitioner ave protected. Otherwise, the rules, statutes

and constitution become meaningless.

POINT III

DAMAGES VW7ERE REDUCED BY

SPECULATION.

The Cireuit Court’s caleulation of damages is in con-

flict with this Court in Zenith Radio Corporation v.

Hazeltyne Rescarch, 895 U.S. 100 (1969) ; Bigelow v.

RKO Pictures, Inc., 327 U.S. 261 (1946), and East-

man Kodak Co. v. Southern Photo Material Co., 273

U.S. 359 (1927) as well as with other circuits in Flint-

kote Company v. Lysfjord, 246 F. 2d. 368 (2d Cir.

1957), and William Goldman Theaters, Inc. v. Lowe's,

Inc., 164 F. 2d 1021 (3:d Cir.) cer. denied, 334 U.S.

811 (1946).

At trial, the Court concluded the Petitioners proved

a reasonable damage theory based on market share,

T. Ex. p. 248. Defendants presented a damage theory

based on sales, T. Ex. A-30, unsupported by any expert

testimony. However, the Trial Court adopted defen-

dant’s damage theory then reduced damages by an ad-

ditional thirty percent (80° ) based on admitted specu-

lation. The speculation being the amount that Peti-

tioner damages should be reduced because of the effect

of Petitioner going to work full-time in 1974. The

20

Court stated that no direct evidence on this point was

introduced at trial. Amended Findings p. 39a.

In affirming the Trial Court’s reduction based on

admitted speculation, the Tenth Circuit in direct con-

flict with the above-mentioned cases, which hold that

Plaintiff is entitled to his reasonable, proven damages

and to the highest damage award that can be proved

at trial. As the Second Circuit held in Lowe’s, supra;

when two equally supported theories of damages are

introduced to the Court, the higher of the two must be

used. In this case, two reasonable theories were intro-

duced and the Court should have applied the higher

theory introduced by Petitioners. However, the Court

did not even accept the lower of the two reasonable

theories, but rather adopted its own theory admit-

tedly based on speculation.

The Court reasoned that because Olsen was working

full-time during the base year, part of his profits

should be used in determining damages and, accord-

ingly, reduced the amount of profits in that year by

thirty percent (30%). The Court admits that no direct

evidence was introduced supporting its arbitrary re-

duction, Therefore, the allocation of profit in reducing

damages could only be based on pure speculation.

The arbitrary reduction of damages without some

proof determining the amount of the allocation is in

direct conflict with this Court’s holdings in Bigelow,

supra, and Eastman Kodak, supra. These cases hold

that the burden of uncertainty is on the wrongdoer.

See also Von Kalinowski Antitrust Laws and Regula-

tions, §115.02(2).

The Circuit Court’s decision is also in conflict with

Zenith Radio Corp, supra. In that case, this Court held

21

that defendant has the burden to prove other causes

of the plaintiff’s injuries once the injury has been

proven. In effect, the Trial Court by the arbitrary

reduction in damages places the burden on the Peti-

tioners to clear up uncertainty and to prove no other

causes of their injuries.

In addition, the Trial Court’s reasoning overlooks

the evidence that argues against the reduction of the

damages. That evidence being that during the conspir-

acy, Guitars, Inc., had three people managing three

stores on a part-time basis and they could not pene-

trate the market because of the boycott and refusal to

deal to protect the price-fix. Even if some of the in-

crease in profit after the end of the boycott could be

attributable to the fact that Olsen was now working

full-time, no reduction should have been made because

the evidence clearly gives the inference that Olsen’s

failure to work full-time was due to the boycott. There-

fore, the amount of profits that he lost because of his

inability to penetrate the market and consequently be-

ing unable to work full-time and make a living, is sim-

ply a part of his damagvs. If there was any evidence

on the issues of the amount of his profits, that could

be attributed to his working full-time. That would be

simply one element of his damages which he should be

able to recover because of the conspiracy barring his

efforts to penetrate the market.

In effect, the Court is stating that Olsen was in con-

trol of the conspiracy and could have ended it at any

time by going to work full-time. Not only is the above

thought ludicrous, it is contrary to the evidence. The

demonstrable economic evidence shows that even if

Olsen was working seven (7) days a week 365 days a

vear, he still could not have penetrated the market. See

22

Plaintiff’s Exhibit 221 Appendix D, which shows that

during the time the conspiracy was in effect no one

could penetrate the CBS market in Utah.

The Trial Court also made an error by failing to

award multiple damages where separate multiple in-

juries were proven. Plaintiff is entitled to recover dam-

ages for injuries sustained by way of the boycott, re-

fusal to deal to protect the price-fix, and trade name

infringement. Failure of the Trial Court to award

damages for these multiple causes of injury is in con-

flict with Albrecht v. Herald, 452 F. 2d 124 (8th Cir.

1971). See also 16 ALR Fed. 14 and Zenith, supra,

holding that the plaintiff is entitled to recover mul-

tiple damages for multiple injuries. Consequently the

Court should grant a Writ of Certiorari in this case so

they can review the decisions on damages and resolve

the dispute.

POINT IV

THE LOWER COURTS ERRED IN DISMISSING

THE SHERMAN ACT SECTION 2 CLAIMS.

Petitioners § 2 claims consist of conspiracy and at-

tempt to monopolize. The lower courts dismissed the

§ 2 conspiracy to monopolize claims based on Petition-

ers failure to prove two of the four required elements

of proof in § 2 conspiracy to monopolize cases. Those

two elements are: 1) an appreciable amount of com-

merce; 2) specific intent.

With regard to the commerce issue, the lower courts

findings are clearly erroneous under the test of Fed-

eral Rules of Civil Procedure 52(a) or they will stand

as new precedent setting law as the single exception

bo

ie)

case in the entire judicial system where the effect on

commerce was satisfied for a § 1 violation of the Sher-

man Act, but not for a § 2 violation. See, Amended

Findinrs 2* Conclusion of Law No. 4, where the com-

merce requirements are met for a § 1 violation. See,

Tenth Circuit Opinion at p. lla, where the commerce

requirement is not met for § 2 claims. Also see, Kint-

ner, “Federal Aniitrust Law,” Vol. II, 1980 §14.4, n.

27. “Indeed there exists no reported case in which the

subject of a conspiracy to monopolize has been held to

be too small to constitute, ‘an appreciable part’ of com-

merce. See generally, 2 J. Von Kalinowski Antitrust

Laws and Trade Regulations. § 9.01 [4], (1976). (Em-

phasis added.)

The lower court rulings in our case separated the

proven § 1 conspiracy issues from the § 2 claims when

they should have allowed the § 1 evidence to merge with

the § 2 claims. United States Attorney General Na-

tional Committee to Study the Antitrust Laws, (1955),

p. 61 § «., citing United States v. Swift, 196 U.S. 375,

(1905) for the basic statement of the rule, in part:

“When a conspiracy or combination is involved proof

of this intent merges with proof of the conspiracy.”

(Emphasis added. )

Addressing the specific intent issue, this Circuit

Court’s opinion is in conflict with itself. This is evi-

denced where Petitioners meet the specific intent bur-

den of proof under attempt to monopolize. Tenth Cir-

cuit Opinion at p. 9a. Then, inexplicably, Petitioners

fail to meet the burden of specific intent in the same

conspiracy under conspiracy to monopolize. See, Tenth

Circuit Opinion at p. 12a.

The lower courts dismissed the § 2 attempt to mon-

opolize claims based on Petitioners failure to prove

24

two of the four required elements of proof in attempt

cases. Those elements are: 1) dangerous probability ;

and 2) relevant market.

Addressing the dangerous probability issue, the low-

er courts opinions are clearly erroneous because proof

of dangerous probability merges with proof of the § 1

violation. United States v. Swift, supra. Specifically,

the lower courts found a legal monopoly coexistent with

an illegal conspiracy. Tenth Circuit Opinion at p. 11a.

The lower courts also made conflicting findings. See,

Amended Findings at p. 38a, where there was little com-

petition for CBS instruments until 1974-75. Such a

finding makes the CBS legal monopoly illegal. Sinith

Klein Corp v. Eli Lilly & Co., 575 F. 2d 1056, (8rd

Cir.) cert. denied, (1978), citing the narrow or intra-

brand rule for monopoly. The lower courts in our case

made no effort to explain the legal monopoly as it re-

lated to intrabrand competition, where little interbrand

competition existed as to the complete line of CBS in-

struments.

Addressing the relevant market issue, relevant mar-

ket is not required in per se cases; United States v.

Griffiths, 334 U.S. 100, 92 L. Ed. 1248, (1948). Our

case is a per se case. See, Tenth Circuit Opinion at

p. 13a. Petitioners attempted to use a professional in-

strument market as separated from an amateur instru-

ment market. That theory was rejected by the lower

courts, thereby inferring that amateurs and profes-

sionals play the same instruments. Petitioners market

theory was a classic viable theory. Hastman Kodak v.

Southern Photo Material Co., at 273 U.S. 376, 47 S. Ct.

404, Even so, the CBS market in Utah was totally ex-

clusionary, eliminating all competitors to protect anti-

competitive price-fixing. See, Trial Exhibit P-221 at-

bo

or

tached in Appendix D. If the lower court opinions are

allowed to stand in our case, this will be the first case

on record to find a legal monopoly where competitors

have been foreclosed from a substantial market to pro-

tect illegal price-fixing. See, United States v. Interna-

tional Salt, 382 U.S. 392, 68 S. Ct. 12 (1947), where

such foreclosures are per se illegal.

There also exists in the judiciary, a significant con-

troversy between the circuits as to what elements of

proof are required in § 2 attempt and conspiracy cases.

Lessig v. Tidewater Oi! Co., 327 F. 2d 459 (9th Cir.

1964). Dangerous probability and relevant market

were not required in Lessig, supra, to prove a viola-

tion. The Supreme Court has never directly confronted

the Lessiy case exception to guide the judiciary, leav-

ing only dicta to assure uniformity in the judicial pro-

cess. Walker Process Equip., Inc. v. Food Machinery

& Chenical Corp., 382 U.S. 172, 86S. Ct. 347, (1965).

Cited for that purpose in Kintner, supra, Vol. II § 13.

The lower courts holdings on the § 2 claims creates

confusion in interpreting the antitrust laws. This is so

because the lower courts held that Petitioner was ac-

tively and aggressively fi shting the conspiracy to mon-

opolize in his efforts travelling around the country

to gather product wherever he could and thereby pre-

cluding monopoly. See, Tenth Cireuit Opinion at p. 9a.

“The likelihood that monopolization would occur was

very remote because Olscn showed himself to be a very

aggressive competitor.” The Cireuit Opinion is saying

that if one competitor is vigorously defending the right

of free enterprise and competition in this country, then

those attempting to monopolize will never be held liable

for damages even though they may have driven all

other competitors in the geographical market from the

26

trade. Since that is exactly what happened in our case,

specifically as to the CBS line of goods for which there

was little competition until 1974-75, that holding alone

should spark this Court to grant a Writ of Certiorari

to the Opinion of the Circuit Court to see that justice

is done in the Court’s capacity as supervisor of the

antitrust laws.

CONCLUSION

For the foregoing reasons Petition’s respectfully re-

quest this court to issue a Writ of Certiorari to the

United States Court of Appeals for the Tenth Circuit

to review the decision of that Court.

JUN 15 1993

DATED this 20... day Of c..ccccsccccseseeeeee , 1983.

Respectfully submitted,

SUMMERHAYS, RUNYAN

&

Wl jas dcbabiveniivcageaen

LOWELL V. SUMMERHAYS

EDWARD T. WELLS

Counsel of Record

W. ANDREW CLAWSON

Attorneys for Petitioners

la

APPENDIX A

PUBLISH

UNIT!D STATES COURT OF APPEALS

TINT CIRCUIT

No. 82-1857 and 82-1400

CLAIR OLSEN and GUITAR CITY STUDIOS, INC.,

a Utah Corporation,

Plaintiffs-Appellants,

vs.

PROGRESSIVE MUsic SUPPLY, INC.;

NORLIN Music, INc., formerly

CHICAGO MUSICAL INSTRUMENTS; and

PEAVEY ELECTRONICS, INC.,

Defendants-Appellees.

Appeal from the Un'ted States District Court

for the District of Utah

(D.C. No. C-75-158)

EDWARD T. WELLS and W. ANDREW CLAWSON of Summerhays,

Runyan and McClelland, Salt Lake City, Utah (LOWELL V.

SUMMERHAYS, of Summerhays, Runyan and McClelland, Salt

Lake City, Utah, on the brief), for Plaintiffs-Appellants.

STEPHEN G. CROCKETT, of Larsen, Kimball & Parr, Salt Lake

City, Utah, for Defendant-Appellee Progressive Music Sup-

ply, Inc.

2a

BRYCE E. ROE, of Roe and Fowler, Salt Lake City, Utah, for

Defendant-Appellee Norlin Music, Inc., formerly Chicago

Musical Instruments.

CURTIS L. FRISBIE, JR., of Gardere & Wynne, Dallas, Texas

(Mark W. Bayer, of Gardere & Wynne, Dallas, Texas, with

him on the brief), for Defendant-Appellee Peavey Electron-

ics, Inc.

Before MCWILLIAMS, DOYLE and SEYMOUR,

Circuit Judges

DOYLE, Circuit Judge

The plaintiff Olsen does business as Guitar City

Studios, Inc., and he brings this action pursuant to

Sections 1 and 2 of the Sherman Act, 15 U.S.C. $$ 1

and 2, and Section 2(e) of the Clayton Act, 15 U.S.C.

13(e).

Named as defendants in Olsen’s complaint and

amended complaint are Progressive Music Supply, Inc. ;

Acoustic Control Corporation; Ovation Instruments,

Ine. (a/k/a Kaman Corporation) ; Norlin Music, Inc.

(formerly Chicago Musical Instrument Company) ;

CBS Musical Instruments (a division of CBS, Inc.) ;

ARP Instruments, Inc.; and Peavey Electronics Cor-

poration.

The claims against ARP and CBS have been dis-

missed. Also, Judge Anderson, the trial judge, granted

several of the defendants’ motions to dismiss on behalf

of claims against Norlin, Ovation, Acoustic and Pea-

vey. Olson’s Section 2 Sherman Act claims against Pro-

gressive involving an attempt to monopolize and con-

spiracy to monopolize were also dismissed.

3a

Finally, the court found that there were only two

counts on behalf of the appellants which had merit.

First, the court determined that Progressive had con-

spired to restrain trade in violation of Section 1 of the

Sherman Act. The court, however, found that Olsen

had suffered no injury as a result of this conspiracy,

and so the cour't concluded that Olsen was not entitled

to damages based on this conduct. Second, the court

held that Progressive had violated Section 1 of the

Sherman Act by conspiring to boyeott Olsen from re-

ceiving CBS products. Damages were found to total

$4,308, which, after tre»ling, amounted to $12,909.

I,

FACTUAL BACKGROUND

Olsen was and is engaged in the retail sale of mu-

sical instruments in the Salt Lake City, Utah area.

During the period commencing in 1964 and continu-

ing to 1975, Olsen’s business was conducted under the

name of “Guitars, Inc.,” a Utah corporation. One of

the several people associated with Olsen in this venture

was George Best. Until 1970, Olsen operated an out-

let at Kaysville, Utah, and Best operated an outlet at

Bountiful, Utah. Guitars, Inc. ordered instruments for

both stores, paid half of the telephone bills of each

store, and held the franchises in its name. The proceeds

from sales by the stores were forwarded to Guitars,

Inc. After the bills were paid, those proceeds were di-

vided among Olsen, Best and an associate named Ste-

ven Hight.

During the year 1970 there was a disagreement be-

tween Olsen and Best, and they executed a separation

agreement which essentially terminated all business

relations between them, and then each began conduct-

4a

ing his own business operation, essentially as sole pro-

prietors of each store. Guitars, Inc. still served as a

purchasing entity. Following this division, Best en-

tered into a brokerage agreement with the defendant

Progressive Music Supply, Inc., which is said to be one

of the largest retail music instrument dealers in Utah.

In February of 1975, Olsen formed a new corpora-

tion, Guitar City Studios, Inc., and during the time

leading up to that several changes were made in OI-

sen’s business. Prior to 1974, Olsen had operated his

Kaysville store on a part-time basis. In 1974 he moved

his location and commenced business full-time. Olsen

had also added a repair service to his business.

Following the changes made in his business opera-

tions, Olsen’s sales increased dramatically. Prior to

1974 he sold about 7% of the volume that was sold by

Progressive, the market leader in Utah. After chang-

ing his business to a full-time operation, Olsen’s sales

rose, until in 1977, they were approximately 70% of

Progressive’s sales.

After Best entered into the brokerage agreement

with Progressive in 1971, Olsen maintained that he

had difficulties in obtaining musical instruments from

various manufacturers. The defendant manufacturers

involved in the present litigation were willing to make

Olsen a dealer, but later refused to sell to Olsen, due

to commitments to Progressive. This is according to

Olsen’s allegations. Olsen maintains that he was thus

forced to obtain or bootleg instruments through other

dealers at higher costs, and that this caused actual fin-

ancial loss. As a result, in April of 1975, Olsen and

Guitar City Studies, Inc., brought suit against Pro-

gressive and six manufacturers.

oa

The case based upon Section 1 of the Sherman Act

alleges that Progressive conspired separately and joint-

ly with each manufacturer to fix prices, establish Pro-

gressive as ecch manufacturer’s exclusive dealer in the

state of Utah, terminate Olsen’s dealing in each manu-

facturer’s products (except as against Peavey), and

boycott Olsen’s business. A further complaint on be-

half of Olsen was that Progressive conspired with cer-

tain unnamed co-conspirators, for example, George

Best, CBS Musical Instruments (CBS) and Bobbie

Herger (owner and operator of Herger’s Music Store

in Provo, Utah), in violation of Section 1 of the Act.

Olsen asserts that Progressive conspired with Best to

cause Olsen to lose franchises, to destroy his credit and

business reputation, to take over his business location

and terminate his corporate charter, to fix prices, and

to cause manufacturers to boycott his business. Fur-

ther allegations by Olsen as against Progressive and

CBS were that, with the help of Herger, they conspired

to establish Progressive as CBS’s exclusive dealer for

the state of Utah, to fix prices, to terminate Olsen as

a CBS dealer, to boycott Olsen’s business and to cause

CBS to require other de»!ers not to sell CBS products

to Olsen. Olsen’s final allegation is that the defendants

conspired together to boycott Olsen and to attempt to

monopolize the Utah market in certain musical instru-

ments.

II.

THE CLAIMS AGAINST NORLIN,

OVATION AND PEAVEY

These named defendants are shown to be manufac-

turers of musical instruments. As to Norlin, there

were a total of sixteen charges of unfair practices and

6a

competition. As to Ovation, there were four such

charges, and as to Peavey, there were three such

charges. There was also a general allegation against

Norlin, Ovation, Peavey and others that they had con-

spired together to boycott Olsen and had conspired to

create a monopoly on behalf of Progressive. Following

the presentation of the evidence, the defendants moved

for dismissal based upon insufficiency of the evidence.

The court said that Norlin had refused to deal with

Olsen only as a business convenience, and not for any

anti-competitive purpose. Also the trial court deter-

mined that Norlin had not committed the anti-com-

petitive acts alleged by Olsen, and that Norlin treated

Olsen and Progressive similarly.

As to Ovation, the court, upon weighing the evidence,

concluded that Ovation had not violated any of the

sections of the Sherman Act.

Finally, with respect to Peavey, the trial court weigh-

ed the evidence and the inferences to be drawn there-

from and reached the conclusion that Peavey had not

conspired with any other defendant contrary to Section

1 of the Sherman Act. And, according to the court,

Peavey had not conspired to fix prices or to create a

monopoly on behalf of Progressive.

We conclude that the trial court was correct in mak-

ing these rulings.

ITI,

DISMISSAL OF OLSEN’S CLAIMS AGAINST

NORLIN, OVATION AND PEAVEY.

In reviewing the propriety of the rulings, we are

governed by the clearly erroneous test. Fed. R. Civ. P.

7a

41(b), 52(a). See Blankenship v. Herzfeld, 661 F. 2d

840, 845 (10th Cir. 1981); and see Woods v. North

American Rockwell Corp., 480 F. 2d 644, 645-46 (10th

Cir. 1973).

It is Olsen’s position that when a 41(b) motion is

imposed in an anti-trust case, the evidence must be

viewed in a light most favorable to the plaintiff. In

light, however, of Blankenship, which also involved

such a motion in a private anti-trust case, it would

appear that Olsen’s view is unfounded. See also Rut-

ledge v. Electric Hose & Rubber Co., 511 F. 2d 668,

676 (9th Cir. 1975), which said: “[t]he fact finding

process under a Rule 41(b) motion calls for an adjudi-

cation upon the merits of the plaintiff’s claims and

may involve a weighing of the evidence as it stands

at the close of the plaintiff’s case.”

The district court drew permissible inferences based

upon the record evidence. Moreover, as this court held

in Rasmussen Drilling v. Kerr-McGee Nuclear Corp.,

571 F. 2d 1144, 1148 (10th Cir.), cert. denied, 439 U.S.

862 (1978), “[a] choice between two permissible views

is not ‘clearly erroneous.’ ”

IV.

DID THE TRIAL COURT ERR IN DISMISSING

OLSEN’S SECTION 2 SHERMAN ACT

ATTEMPTED MONOPOLIZATION CLAIM

AGAINST PROGRESSIVE?

Olsen argues that Progressive attempted to mon-

opolize the Utah retail market in quality synthesizers,

quality amplifers and quality electronic and acoustic

8a

guitars. “Quality” was defined as guitars and a).pl.-

fiers retailing for over $800 and synthesizers .¢ ailing

for over $709.

To support a claim based on an attempt to monopo-

lize plaintiffs are required to establish several iteius.

First, they must demonstrate a dangerous probability

of success. Lorain Journal Co. v. United States, 32

U.S. 148, 158 (1951) ; American Tobacco Co. v. United

States, 328 U.S. 781, 809 (1946) ; Swift & Co. v. Unit-

ed States, 196 U.S. 375, 396 (1905). Second, plaintiffs

must prove acts in furtherance of the attempt, although

thes acts need not be successful. Lorain, supra, at 153.

Third, plaintiffs must demonstrate specific intent to

monopolize. Times Picayune Publishing Co. v. United

States, 345 U.S. 594, 626 (1953) ; E. J. Delaney Corp.

v. Bonne Bell, Inc., 525 F. 2d 296, 306 (10th Cir.

1975), cert. denied, 425 U.S. 907 (1976). Fourth, a

relevant market, within which the attempted mono-

polization occurred, must be established.*

The district court dismissed Olsen’s attempted mon-

opolization claim because of its failure to establish

Coleman Motor Co. v. Chrysler Corp., 525 F.2d 1338, 1348

(3d Cir. 1975); Bonne Bell, supra, at 305; George R. Whitten,

Jr., Inc. v. Paddock Pool Builders, 508 F.2d 547, 550 (1st Cir.

1974), cert denied, 421 U.S. 1004 (1975); Acme Precision

Prods., Inc. v. American Alloys Corp., 484 F.2d 1237, 1240

(8th Cir. 1973); Bernard Food Indus., Inc. v. Dietene Co.,

415 F.2d 1279, 1284 (7th Cir. 1969), cert denied, 397 U.S. 912

1970); United States v. Chas. Pfizer & Co., 245 F. Supp. 737,

739 (E.D.N.Y. 1965); Becker v. Safelite Corp., 244 F. Supp.

625, 637 (D. Kan. 1965). But see, Lessig v. Tidewater Oil Co.,

327 F.2d 459, 474 (9th Cir.), cert. denied, 877 U.S. 993 (1964)

(“the relevant market is ‘not in issue’ in an attempt or con-

spiracy to monopolize case’”’).

9a

two of the aforementioned requisites, to-wit, danger-

ous probability of success and relevant market.

With regard to dangerous probability of suecess the

district courc said:

[P]laintiff’s own expert, Mr. Scott Lloyd, testi-

fied that the information submitted in this case

did not show Progressive’s percentage share of the

market. Without this, the court is unable to make

any finding as to the dangerous probability that

Progressive could monopolize the market.

A review of the record reveals that there was no

such dangerous probability of monopolization by Pro-

gressive. In fact, Progressive’s efforts to control mar-

ket share by causing manufacturers not to ship pro-

ducts to Olsen were consistently thwarted by Olsen’s

ready resort to an alternative source of supply: other

dealers. The likelihood that monopolization would oc-

cur was very remote because Olsen showed himself to

be a very aggressive competitors.

With regard to Olsen's failure to establish a rele-

vant market, the district court stated that Olsen had

failed to prove a relevant product market “composed

of a unique set of products, distinguishable from pro-

ducts selling for less money. In short, the plaintiffs

failed to show that the products included in the market

definition were not ‘resonably interchangeable’ and

competitive with less expensive products.” (Quoting

United States v. E. I. DuPont de Nemours & Co., 351

U.S. 377, 395 (1956). Due to the fact that a “suffi-

ciently discreet and separable product market” had not

been defined, the trial court concluded that it could not

“gauge the defendants’ potential for inflicting eco-

nomic harm.”

10a

Even if Olsen had adequately delineated a relevant

product market, he nevertheless failed to prove that

Progressive had a controlling position in that market.

Indeed, the absence of proof of market share was em-

phasized throughout the record.

Olsen contends, however, that evidence of market

share was introduced, namely, Utah sales of CBS Fen-

der and Rhodes products. This contention is mislead-

ing. It was introduced not to demonstrate market share,

but rather to show that Progressive was ‘“‘cherry-pick-

ing,” that is, picking a manufacturer’s type ‘“A”’ pro-

duct without having to pick and promote his full line.

Moreover, the exhibit offered by Olsen as proof of mar-

ket share concerns but a subset of the relevant pro-

duct market in issue. The relevant product market was

all quality guitars, amplifiers, and synthesizers. The

CBS sales study offered by Olsen encompasses, of ne-

cessity, only CBS products. Therefore, it cannot serve

as evidence of market share. To be sure, the study

could, after a few calculations, yield evidence of total

market share if CBS’s own share of the Utah market

had been established, which it was not. Olsen’s expert

witness responded “No” to the following questions:

“Can you give me an approximation that CBS had 30

percent of the market, 10 percent of the market in

1974 or 70 percent? Can you tell me that far?”

In light of the foregoing, we conclude that the trial

court’s findings were not clearly erroneous. Accord-

ingly, the dismissal of Olsen’s attempt to monopolize

claim should be affirmed.

Vs

DID THE TRIAL COURT ERR IN DISMISSING

OLSEN’S SECTION 2 SHERMAN ACT

CONSPIRACY TO MONOPOLIZE CLAIM

AGAINST PROGRESSIVE?

lla

The elements needed to establish conspiracy to mon-

opolize are as follows:

First, the existence of a combination or conspiracy

to monopolize. American Tobacco, supra, at 788.

Second, overt acts done in furtherance of the com-

bination or conspiracy. Cullum Elec. & Mechanical,

Inc. v. Mechanical Contractors Ass’n. of South Caro-

lina, 486 F. Supp. 418, 425 (D.S.C. 1976), aff'd, 569

F. 2d 821 (4th Cir. 1978).

Third, an effect upon an appreciable amount of in-

terstate commerce. United States v. Yellow Cab Co.,

Non

oo2 U.S. 218, 225 (1947); Times-Picayune, supra,

at 611.

Fourth, a specific intent to monopolize. American

Tobacco, supra, at 809.

A relevant market need not be established. Salco

Corp. v. General Motors Corp., 517 F. 2d 567, 576

(10th Cir. 1975) (“specific intent to monopolize is the

heart of a conspiracy charge, and a plaintiff is not re-

quired to prove what is the ‘relevant market’ ”’).

The district court based its dismissal of Olsen’s con-

spiracy to monopolize claim on two factors. First, Ol-

sen did not establish that the conspiracy of Progres-

sive involved an appreciable part of interstate com-

merce. The only part of commerce which could con-

ceivably be affected by such activity is the CBS Fender

line. Progressive already had a monopoly on that line

under an arrangement which the court had previously

found was not per se illegal under Section 1.

12a

The trial court also dismissed Olsen’s conspiracy

claim on the basis that Progressive did not harbor a

specific intent to obtain a complete monopoly in all

lines of musical instruments. The court observed that

the evidence indicated only that ‘Progressive held ex-

clusive franchises on certain product lines and may

have prevented others from obtaining business on those

lines.”

We conclude the trial court’s findings were not

clearly erroneous. The dismissal by the trial court of

the conspiracy to monopolize claim is affirmed.

VI.

DISCUSSION OF OLSEN’S BOYCOTT THEORY.

The trial court found that Progressive had conspired

with CBS and Bobbie Herger to boycott Olsen, whereby

he would not be able to obtain CBS products. This boy-

cott was an element of the price fixing conspiracy also

alleged engaged in by Progressive and Herger. The

trial court said, “it was necessary to boycott Olsen in

order that high prices set by Progressive and Herger

could be maintained and not be undercut by Olsen.”

The argument of Progressive on cross-appeal is that

the trial court improperly treated the group boycott

involved herein as a per se violation of the anti-trust

laws. United States v. Realty Multi-List, Inc., 629 F.

2d 1351, 1867 (5th Cir. 1980). Progressive contends

that a group boycott is not deemed a per se violation

if it is “at least potentially reasonably ancillary to

joint, efficiency-creating economic activities. (Quoting

Realty Multi-List, supra).

13a

In this case there is evidence that there was a boy-

cott which was “clearly exclusionary or coercive in

nature.” Gould v. Control Laser Corp., 462 F. Supp.

685, 691 (M.D. Fla. 1978), aff'd, 650 F 2d 617 (1981).

Thus, the case differs from those in which ‘“‘courts have

circumvented the rigidity of the per se rule by reason-

ing that the need for its application ‘depends not upon

a finding that * * * [a restraint] constitutes a boy-

cott’ but upon an analysis of its purpose and competi-

tive impact.’ ’’ Note, The Facial Unreasonableness The-

ory: Filling the Void Between Per Se and Rule of Rea-

son, 55 St. John’s L. Rev. 729, 750 n. 155 (1981)

(quoting Gould, supra, at 691). Pro-competitive im-

pacts or motives within the trial court’s findings are

difficult to see. For instance, Herger boycotted Olsen

because “she had an independent prejudice against

giving competitive dealers large discounts.” In addi-

tion, Progressive harbored a “‘predatory intent toward

competing dealers.”

From the findings it would appear that the boycott

engaged in by Progressive was per se violative of the

anti-trust laws. Klor’s, Ine. v. Broadway-Hale Stores,

Inc., 359 U.S. 207 (1959) (per se violation of Sher-

man Act exists when department store conspires with

appliance manufacturers and distributors to prevent

sales to small retail appliance stores).

Based upon the proposition that Progressive had vio-

lated Section 1 of the Sherman Act by conspiring to

boyeott Olsen from receiving CBS products, the trial

court assessed damages at $4,303 before trebling. In

calculating these damages, 1975 was used as a base

year but by that time the boycott had been terminated,

thus giving Olsen free access to CBS products. The

damage study employed by the court then projected

l4a

backwards from 1975 to estimate the amount of dam-

ages that the boycott had caused. Moye specifically,

the study reduced Olsen’s total retail CBS sales for

1975 (stipulated to be $27,000) to a wholesale price

figure, compared this figure with equivalent figures

for CBS dealers in the state to determine Olsen’s share

of the CBS market in Utah for 1975, and then calcu-

lated the amounts Olsen would have earned if he had

enjoyed the same market share in previous years. The

projections of market share were reduced by 30%,

however, to account for changes in Olsen’s business

operations, between 1971-1974 and 1975. The preced-

ing damage analysis as worked out by the court is ap-

pended to this opinion.

The court determined that Olsen had suffered net

lost profits of $4,303 from the years 1971 to 1974.

Pursuant to 15 U.S.C. § 15, this figure was trebled to

$12,909.

The calculations were derived, with one significant

exception, from a damage study introduced into evi-

dence by Olsen. The exception was that, unlike the dam-

age study, the court did not assume that Olsen’s in-

crease in market share in 1975 (the base year) was

due solely to the termination of the boycott. The court

noted that in 1975, “Olsen was operating in a substan-

tially different mode than during most of the damage

period.” Olsen had converted from a part-time to a

full-time business and had, by moving to a larger store,

doubled his floor space. Accordingly, the court dimin-

ished the 1975 sales base by 30% to reflect the role

of the extra hours and space.

On appeal, Olsen argues that the damages awarded

were too low, while Progressive asserts that the evi-

dence does not sustain any award for damages. Olsen’s

15a

first contention is that the 30% reduction is improper.

Olsen argues that he would have moved and switched

to full-time operations well before 1975 if the boycott

had not heen in effect. For that he maintains that it

was wrong for the trial court to reduce damages in an

arbitrary manner on account of Olsen’s very failure

to move.

The trial court considered as “‘too speculative” Ol-

sen’s contention that he would have altered his business

operations but for the boycott. The court is referring

to Olsen’s contention that he would have altered his

busipess operations but for the boycott. It is true that

a plaintiff in an anti-trust case should ‘“‘not be held to

a rigid standard of proof regarding the amount of

damages, since in such cses economic harm is frequent-

ly intangible and difficult to quantify.” King & King

Enterprises v. Champlin Petroleum Corp., 657 F. 2d

1147 (10th Cir. 1981), cert. denied, 454 U.S. 1164

(1982), citing Story Parchment Co. v. Paterson Parch-

ment Paper Co., 282 U.S. 555, 562-65 (19381). On the

other hand, ‘damages may not be merely speculative.”

King & King, supra.

Evidence in the record provided a reasonable basis

for the court’s determination. That is that Olsen’s fail-

ure to alter his business operations in 1971-1974 was

not due to his inability to obtain musical instruments.

Olsen testified that, except for several delays which

could well have been caused by order backlogs, he was

able to obtain instruments from other dealers, if not

from the manufacturers themselves. Also, Olsen was

employed during that period by the Federal govern-

ment. As this employment provided the bulk of Olsen’s

income, it is reasonable to conclude that the fear of

losing a secure source of income, as opposed to an in-

16a

ability to obtain musical instruments, prevented Olsen

from taking up his music store business on a full-time

basis.

Olsen also contends that the trial court was incor-

rect in applying a 30% reduction formula. According

to Olsen, the reduction should have been applied only

to estimated 1971-1974 sales, not to actual sales.

However, Olsen’s math is wrong. The 30% reduction

considers the fact of reduced floor space and selling

time in the years 1971-1974 (as opposed to the base

year of 1975). Floor space and selling time is essential

to sales of actual and hypothetical musical instruments.

Space and time devoted to hypothetical sales cannot be

devoted to actual sales. Accoidingly, the 50% reduc-

tion in both actual and estimated sales does not seem

unreasonable in order to deal with Olsen’s change in

business operations between 1971-74 and 1975.

Progressive argues on cross-appeal that the evidence

cannot sustain an award of damages to Olsen of any

amount. The trial court, however, gave careful scrutiny

to the entire picture and had no trouble finding that

Olsen had sustained his burden of proof as to injuries

suffered. The court said that “[i]nferences can be

drawn that the boycott conspiracy foreclosed at least

two avenues of supply, Herger and Browne [owner and

operator of California Musical Instruments], from

which injury occurred.” The trial court also concluded

that Progressive had not established that other sources

of supply fully compensated for the foreclosure of Her-

ger and Browne.

In view of these findings, this court should uphold

the award of damages. See King & King, supra, at

17a

1158 (“once there is found to be sufficient factual evi-

dence of damages, the plaintiffs are not obligated to

establish the quantum of damages ‘with mathematical

precision.’”’) (Quoting Cackling Acres, Inc. v. Olson

Farms, Inc., 541 F. 2d 242, 246 (10th Cir. 1976), cert.

denied, 429 U.S. 1122 (1977). See also Trabert &

Hoeffer, Inc. v. Piaget Watch Corp., 633 F. 2d 477,

484 (7th Cir. 1980) ; Woods Exploration & Producing

Co. v. Aluminum Co. of America, 509 F. 2d 784, 792-93

(5th Cir.), cert. denied, 423 U.S. 88 (1975); Volasco

Prods. Co. v. Lloyd A. Fry Roofing Co., 346 F. 2d 661,

666 (6th Cir.), cert. denied, 882 U.S. 904 (1965).

VII.

DID THE TRIAL COURT ERR IN DENYING

OLSEN’S PRICE FIXING CLAIM?

The trial court found that Progressive and Herger

had agreed to divide territories and to fix high retail

prices on CBS products in violation of Section 1 of the

Sherman Act. The trial court, however, refused to

award damages on this conduct, based upon its conclus-

ion that the conspiracy had not damaged Olsen. The

court observed that ‘‘[l]ogically, the higher the prices

set by Herger and Progressive, the easier it was for

Olsen to compete in the Utah retail market for CBS

products.”

High fixed prices might facilitate the entrance of

new competitors into a relevant product market, or may

help the competitive position of sellers not participat-

ing in the price fixing conspiracy. Nevertheless, it is

clear that such beneficial features cannot render a

price fixing conspiracy immune from anti-trust attack.

18a

Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 650

(1980). Indeed, price fixing agreements are per se vio-

lative of Section 1 of the Sherman Act. Catalano, su-

pra, at 648; United States v. Container Corp. of Amer-

ica, 398 U.S. 333, 337 (1969) ; United States v. Socony-

Vacuum Oil Co., 310 U.S. 150, 224 n. 59 (1940) ; King

& King, supra, 1151.

However, the violation should not give rise to “dou-

ble liability trebled.”” City and County of Denver v.

American Oil Co., 53 F.R.D. 620, 631 (D. Colo. 1971).

Olsen’s price fixing damage theory would do just that.

Olsen’s damage calculations are as follows:

Progressive’s CBS market 1971-1974 $297,709 1

from the business records of CBS and

Progressive

Guitar City 70° of Progressive’s CBS 208,396 2

market, but for the conspiracy

Wholesale of Guitar City CBS market 104,198 3

at benchmark, 509% of list cost

Guitar City retail sales CBS 177,137 4

70% market, at their normal

discount, or 85% of list

Guitar City gross profit CBS 72,939 5

70% market, line 4 minus line 3

Minus 10.65% variable overhead 22,194 6

expenses, of line 2

Minus awarded boycott damages 4,303

Net economic loss 46,442

Trebled damages 139,326

The weakness of this formula is that it compensates

for the same transactions that have already been ad-

dressed by the trial court’s award of boycott damages.

19a

Line 2 of the derivation assumes that Olsen would have

had 70° of Progressive’s CBS market but for the con-

spiracy. An identical assumption, although phrased in

terms of Olscn’s potential share of the entire Utah CBS

musical instrument maiket (as opposed to his share

of Progressive’s market) was made with respect to Ol-

sen’s boycott damages (see line 4 of trial court’s boy-

cott damage formula). So, therefore, the same injury

is being counted up twice. Accordingly, the trial court

properly declined to award both boycott and price fix-

ing damages where they stemmed from the same trans-

actions.

VIII.

WHAT ABOUT THE CONTENTION THAT SOME

OF THE MORE SIGNIFICANT TRIAL

TRANSCRIPTS WERE MISSING?

Olsen asserts on appeal that trial transcripts which

were favorable to his position were not before the trial

court during the decision making process. Thus, ac-

cording to Olsen, the couct failed to make certain find-

ings, made erroneous findings, failed to understand

Olsen’s economic theories, failed to award price fixing

damages, failed to award reasonably proved boycott

damages, and failed to draw inferences in favor of

Olsen.

Almost every page of the neglected transcripts con-

tains testimony which the trial court was privy to dur-

ing each and every day of the trial below. This ele-

ment, plus the fact that the court had available to it

the bulk of the trial transcripts, all of the pleadings

and all of the trial exhibits, certainly gave the court

the basis for reaching an accurate conclusion. A care-

20a

ful review of the neglected transcripts does not reveal

reversible error by the trial court. See United States v.

Lee, 622 F. 2d 787, 791 (5th Cir. 1980), cert. denied,

451 U. S. 918 (1981) (although the district court

failed to review the entire record, it had ‘‘adequately

informed itself of the record * * * to make the deter-

mination required”) ; Simpson Bros. v. District of Co-

lumbia, 179 F. 2d 430, 486 (D.C. Cir. 1949), cert. de-

nied, 338 U.S. 911 (1950) (although the district court

had not read all the pleadings in the case, “the record

* * * and the opinion of the district court show that by

the end of the hearing on the motions for summary

judgment the court was acquainted with the issues in

the case and that the conclusion reached by the coui't

was — in view of all the pleadings, deposition, affi-

davits and authorities — correct.’’).

Olsen maintains on appeal that certain evidence was

improperly excluded from the record. Progressive

claims that other testimony was improperly received

into evidence. The trial court’s rulings on these mat-

ters did not prejudicially affect the outcome of the liti-

gation. See Union Carbide and Carbon Corp. v. Nisley,

300 F. 2d 561, 586 (10th Cir. 1961), appeal dismissed,

371 U.S. 801 (1962) ; Fed. R. Civ. P. 61.

In light of what appears above, it is the conclusion

of this court that the judgment of the trial court should

be and it is hereby affirmed.

2la

APPENDIX B

[" 64,928] Clair Olsen and Guitar City Studios, Inc.

v. Progressive Musie Supply, Inc., Acoustic Control

Corp., Ovation Instruments, Inc., Norlin Music, Inc.,

formerly Chicago Musical Instruments,’ Columbia

Broadcasting Systems, Inc., and Peavey Electronics

Corp.

U.S. District Court, District of Utah, Central Divi-

sion. No. C 75-153. Filed June 26, 1981.

Sherman Act

Price Fixing—Division of Territories—Agreements

Between Competitors—Retail v. Wholesale Price Fix-

ing—Damages. — An agreement between two compet-

ing authorized musical instrument dealers to fix retail

prices and divide territories constituted a per se viola-

tion of Sec. 1 of the Sherman Act. However, a compet-

ing unauthorized dealer showed no evidence of a con-

spiracy to fix wholesale prices or to set a discount that

the unauthorized dealer should have been given. In

light of its other sources of supply that could be used

to purchase instruments at a discounted price, the un-

authorized dealer was not damaged by the price fixing

agreement. See { 3050.66, 4630.72.

Refusal to Deal—Denial of Dealership—Business

Reasons—Musical Instruments. — A musical instru-

ment distributor’s denial of a dealership to a retailer

1The original version incorrectly indicated Chicago Musical

Instruments as a division of Columbia Broadcasting System,

Inc. The Words ‘a division of” have been omitted in the

amended version.

22a

was premised on the distributor’s independent business

reasons and was not the result of a conspiracy between

the distributor and an existing dealer. The retailer did

not have any repair facilities, which the distributor

strongly favored, no evidence was shown that the deal-

er knew of a proposed dealer agreement with the re-

tailer, and the retailer began operating on a full-time

basis very late in the relevant time period. See * 2420.

Boycotts — Forcing or Inducing Adherence — En-

forcement of Restrictive Dealer Contracts — Com-

plaint by Dealers — Price Fixing. — Creation of credit

problems for dealers, temporary supply cutoffs, and

tracking of instrument serials numbers to enforce a

musical instrument distributor’s policy disfavoring

transshipment of its products to unauthorized dealers,

as a result of an agreement with a complaining au-

thorized dealer, evidenced a conspiracy to boycott an

unauthorized dealer. A price fixing agreement between

the complaining dealer and a competitor also estab-

lished the boycott, because, as a further step of the

agreement, it was necessary to boycott the unauthor-

ized dealer so that the high prices set by the competing

dealers could not be undersold. The second dealer was

in a different market area from the unauthorized

dealer and might have been amenable to dealing with

the unauthorized dealer, but it had previously had its

instrument supply temporarily terminated for noncom-

pliance with the price fixing agreement. Statements

by the distributor and the complaining dealer estab-

lishing predatory intent were also shown by the unau-

thorized dealer. See | 2460, 2480.

Private Suits — Damages — Market Share in Base

Year — Market Forces -—- Change in Operations —

Musical Instrument Industry. — Damages to an unau-

thorized musical instrument dealer, as a result of a con-

28a

spiracy between two competing dealers and their dis-

tributor were based upon the unauthorized dealer’s

market share of the distributor’s products in the rele-

vant market in 1975, when it had free access to the pro-

ducts. hat share was related back over the damage

period. Uncertainty arising from direct evidence of the

extent that the conspiracy prevented the unauthorized

dealer from buying all the products it otherwise would

have was a burden the conspirators had to clarify or

bear. I"luctuations in demand for the instruments, the

distributor’s difficulty in keeping up with demand,

emergence of competing brands, and market produc-

tivity in general were factors considered in determin-

ing the amount of damages. The facts that the unau-

thorized dealer switched from part-time to full-time

selling and moved to a new, larger store during the

relevant period also affected the award. See { 9302.

For plaintiffs: Lyle J. Barnes, Kaysville, Utah,

Lowell V. Summerhays, Salt Lake City, Utah. For de-

fendants: Stephen G. Crockett, Salt Lake City, Utah,

Richard W. Giauque, of Giauque & Williams, Salt Lake

City, Utah, Robert A. Mackey, Los Angeles, Cal., E.

Seott Savage, Salt Lake City, Utah, Bryce E. Roe, Salt

Lake City, Utah.

Amended*

Findings of Fact and Conclusions of Law

ANDERSON, D. J.: After four years of discovery and

motions and a non-jury trial of twenty-seven days that

spanned one and one-half years, this case is now ready

*On April 13, 1981, the court held a hearing at which de-

fendant Progressive orally moved to amend the court’s Find-

ings of Fact and Conclusions of Law, which were entered

herein on April 3, 1981. The basis of the motion was that

24a

for final decision. During the pendency of this action

all of the defendants have been dismissed from the

case, either by stipulation or by order of the court, with

the exception of defendant Progressive Music Supply,

Inc. (Progressive). On November 3, 1975, the parties

stipulated to, and the court ordered, the dismissal of

defendant ARP Instruments, Inc. On December 11,

1975, the court ordered that defendant CBS Musical

Instruments be dismissed without prejudice. At the

close of plaintiffs’ case on June 12, 1979, the court dis-

missed Ovation Instruments, Inc., and Norlin Music,

Inc. And in the court’s order dated May 22, 1980,

[Order Granting in Part Defendants’ Motion to Dis-

miss Under Rule 41(b)], defendants Peavey Electron-

ics Corp. and Acoustic Control Corp. were dismissed.

The May 22, 1980, order also narrowed the issues

that remained for the presentation of defendant Pro-

gressive’s case. It dismissed all of plaintiffs’ Sherman

Act § 2 claims and dismissed plaintiffs’ § i claim, ex-

cept as against Progressive to the extent it involved

CBS Musical Instruments and Bobbie Herger. There-

certain factual errors appeared in the original version. The

court invited counsel to submit the motion in writing with

supporting and opposing memoranda relating to the impact,

if any, the corrections would have on the Conclusions of Law

and Judgment. Olsen filed a motion on April 24, 1981, entitled,

“Motion to Amend and for Additional Findings of Fact and

Conclusions of Law and for Entry of New Judgment Pursuant

to Rules 52 and 59, Federal Rules of Civil Procedure.” Mem-

oranda on the motions have now been filed with the court.

Corrections have been incorporated into the amended version,

and are indicated by footnote, together with any effect the cor-

rection has on the court’s decision. Additional findings and

conclusions have also been made as indicated.

25a

fore, the basic issue remaining to be resolved was whe-

ther Progressive was liable to plaintiffs for illegally

conspiring to restrain trade or commerce in violation

of Section 1 of the Sherman Act and, if so, the extent

of the damages suffered by plaintiffs.

On November 12, 1980, the trial of these final mat-

ters began with the further presentation of plaintiffs’

evidence regarding damages. Progressive then present-

ed its case, concluding on November 18, 1980, on which

date final arguments of counsel were heard. Plaintiffs

were represented by Lowell V. Summerhays, and Pro-

gressive was represented by Stephen G. Crockett. The

court granted counsel leave to file final briefs, and the

same having been received, the matter is finally sub-

mitted.

Briefly summarzied, the parties’ claims are as fol-

lows: Plaintiffs claim that Progressive conspired with

CBS Musical Instruments and/or Bobbie Herger and

others to establish Progressive as the exclusive dealer

for CBS products in Utah, to fix prices, to terminate

plaintiffs as a CBS dealer, and to boycott plaintiffs

from receiving CBS products. Plantiffs further claim

that they were damaged in their business and property

primarily through the loss of sales they should have

had but for the conspiracy. Progressive denies any vio-

lation of Section 1 of the Sherman Act, either by price

fixing or boycott, and denies that plaintiffs have been

damaged as a result of any conduct by Progressive.

Progressive also disagrees with plaintiffs’ method of

formulating damages.

Pursuant to rule 52(a) of the Federal Rules of Civil

Procedure, the court enters the following Findings of

Fact and Conclusions of Law, reflecting the court’s

26a

determination that plaintiffs have established by a pre-

ponderance of the evidence that Progressive conspired

illegally to restrain trade or commerce in violation of

Section 1 of the Sherman Act.’

Findings of Fact

1. At all times relevant herein, plaintiff Clair Olsen

has been engaged in the retail sale of musical instru-

ments, amplifiers, public address systems, and acces-

sories in Kaysville, Utah until early 1975, when he

moved his place of business to a larger store in Kays-

ville. (Transcript, Vo. VIII, p. 1893-96). Prior to April

2, 1974, Olsen operated his business on a part-time

basis. (Transcript, Vol. VIII, p. 1890). After he went

full-time and after he moved to the larger store, the

business’s sales volume increased substantially.* Olsen

engaged in business as a sole proprietor to February

24, 1975, when he caused the organization and incor-

poration of plaintiff Guitar City Studios, Inc. Since

that time, he has been carrying on the same business

as principal officer and sole shareholder of Guitar City.

They interests of Olsen and Guitar City in this litiga-

tion are joint (and hereinafter plaintiffs will be col-

lectively referred to as “Olsen”’).

* The original version found no conspiracy to boycott. On

further reflection, the court has determined that the evidence

shows a conspiracy between Progressive, CBS, and Herger to

boycott Olsen from receiving CBS products from Progressive,

Herger, and Browne.

° The first two sentences of this paragraph in the original

version erroneously stated that Olsen moved his business to the

Centerville store in May of 1974, and that he began operating

his business on a full-time basis in February of 1975.

27a

2. Defendant Progressive Music Supply, Inc. (‘‘Pro-

gressive”) is a Utah corporation engaged in the retail

sale of musical instruments, amplifiers, public address

systems, accessories, and related items. It has retail

stores in Ogden, Provo, and Salt Lake City, Utah. Don

Penman is the primary owner and operator of Pro-

gressive.

3. CBS Musical Instruments (“CBS”) is an operat-

ing subdivision of Columbia Broadcasting Systems.

CBS manufactures and distributes musical instru-

ments that are sold throughout the United States in-

cluding the State of Utah. At all times relevant herein,

Robert P. Bull was a vice president for CBS; Margaret

Current was secretary to Robert Bull from approxi-

mately 1974 to 1975, and later worked for Doug

Browne.

4. Mrs. Bobbie Herger (‘‘Herger’’) is the owner and

operator of Herger’s Music Store in Provo, Utah.

5. Doug Browne, at times relevant herein, owned

and operated California Musical Instruments.

6. The businesses of CBS, Olsen, Progressive, Her-

ger, and Browne involved interstate commerce.

7. The Complaint in this action was filed on April

18, 1975.

[Price Fixing]

8. Commencing sometime in 1967, Penman and Her-

ger agreed to fix retail prices on CBS products at

prices higher than on the CBS price list. The agree-

ment included a division of territories. The agreement

continued until February of 1973. (Transcript, Vol. I,

28a

pp. 178-83; 189-92). Mrs. Herger testified that in late

1972 she contacted CBS about her price-fixing ar-

rangement, and that she was told she could sell the pro-

ducts at whatever price she desired. She testified that

she waited until February because CBS wanted to get

in touch with Penman and ‘“‘work it out” with him.

(Id. pp. 190-91). This leads to the inference that CBS

wanted to obtain Porgressive’s approval before allow-

ing Herger to break the price-fixing agreement. The

evidence shows that in the late 1960’s “pressure was

brought to bear” by CBS representative Bud Driver

to enforce compliance with the price-fixing arrange-

ment. (Id. pp. 169-71). In February of 1973, she then

lowered her prices, in some instances below the CBS

list price. She was not contacted thereafter by Penman

regarding prices. (Transcript, Vol. I, p. 192).

9. There is no believable evidence that Herger and

Penman ever discussed fixing wholesale prices, or more

specifically, whether Olsen should be given a discount

at any particular rate. Nor was there any evidence of

an agreement to that effect. Mrs. Herger testified that

she had a unilateral and independent prejudice against

giving competitive dealers large discounts. (Tran-

script, Vol. I, pp. 207; 223-26). On May 4, 1972, Olsen

purchased one Fender guitar from Herger for resale

to a customer of his. (Ex. A-4). The guitar was sold

at the Progressive retail list price and a 20% ‘“com-

mission” was paid to Olsen indirectly. (Transcript,

Vol I, pp. 207-209, 215). Mrs. Herger testified that the

transaction was handled in this way because CBS

“rowned on transshipping, and because of the pricing

*The preceding three sntences have been addd to demon-

strate CBS’s protectionistic role with Progressive.

29a

and territorial agreement with Progressive. (Jd. at

215; 220-21).° Olsen never tried to purchase CBS in-

struments from Progressive. He testified, however,

that Progressive always sold Olsen CBS parts when he

needed them. (Olsen Deposition, Vol. III, p. 84).

10. Olsen had various sources of supply available to

him through which he could purchase CBS instruments

at wholesale at 60% of the retail list price during most

of the relevant statutory period of April 18, 1971, to

April 18, 1975.° (Transcript, Nov. 18, 1980, p. 206).

It is unclear from any direct evidence the extent to

which CBS products were unavailable to Olsen as a

result of a boycott conspiracy in light of availability

through other dealers.

11. Olsen was not damaged by the Herger-Progres-

sive conspiracy to divide territories and to fix high

prices. Logically, the higher the prices set by Herger

and Progressive, the easier it was for Olsen to com-

pete in the Utah retail market for CBS products.

[Dealership Agreement]

12. Progressive did not conspire with others to pre-

vent Olsen from becoming a CBS dealer. There was evi-

dence produced at trial that CBS had a file on Olsen.

(Current Deposition, Vol. I, pp. 10-15). It was the

practice of CBS to set up a file on any person where

there were three or more pieces of correspondence re-

° The preceding three sentences were added to this amended

version.

° The finding originally stated that the wholesale purchases

could be made at a 60% discount; however, the court had in

mind and intended to state that the wholesale purchase price

was 60% of the retail list price or, in other words, a 40%

discount.

30a

lating to that person to justify a file. (Jd. pp. 9-10).

There is confusion in the Current deposition testimony

concerning whether or not a dealer agreement in the

name of Olsen was approved but not delivered. (Cur-

rent Deposition, Vol. I, pp. 69-72, 84). Regardless of

whether a dealer agreement was approved or not ap-

proved, Olsen has failed to produce evidence that pre-

ponderates in favor of believing that Progressive had

any knowledge of the proposed dealership agreement

or any involvement in Olsen’s being denied a CBS deal-

ership. The court finds that CBS had a policy during

the times relevant which strongly favored dealers of

CBS having their own repair facilities so that CBS cus-

tomers could be given proper service. (Current Depo-

sition, Vol. I, p. 35). During the period from 1971 to

May of 1974, Olsen had no service facilities. (Tran-

script, Vol. II, p. 1724). Furthermore, it was not until

April of 1974 that Olsen began operating his business

on a full-time basis.” No other authorized dealers were

appointed during the same period. It is reasonable to

infer from the above facts that the denial of a dealer-

ship to Olsen was premised on CBS’s independent busi-

ness reasons and not on any conspiracy between CBS

and Progressive, and the court so finds.*

*This sentence was changed from the original to reflect

correctly that Olsen went full-time in April of 1974, not in Feb-

ruary of -1975.

8 In the original version the last two sentences of this para-

graph incorrectly stated that Olsen became a CBS dealer in

1975. In fact, Olsen has never been an authorized CBS dealer.

The court mistakenly reached this conclusion because 1975 was

the first year in which Olsen was able to acquire freely CBS

products. This inadvertence by the court should in no way alter

its decision on this point because the court’s analysis, as based

on this assumption, went only to the idea that he was able to

more freely obtain products during and after 1975.

3la

13. Progressive did not conspire to terminate Olsen

as a dealer of CBS products. Olsen never became an

authorized CBS dealer.’

[Boycott]

14. During at least part of the relevant period here-

in (specifically in 1972), CBS had a policy that its

dealers were not to resell CBS products at wholesale

to dealers not authorized by CBS. Margaret Current

testified that Mr. Bull generally advised dealers that

while CBS could not control where merchandise went

after it was sold to authorized dealers, CBS would pre-

fer that it not be sold to unauthorized dealers. (Cur-

rent Deposition, Vol. I, pp. 47-48). However, the 1972-

19738 CBS Fender authorized dealer agreement states:

“9. Dealer agrees. ...g. to resell Fender products at

wholesale only to dealers who are authorized by Fen-

der to sell Fender products.” (Trial Exhibit P-186).

Current stated that on occasion, CBS had traced serial

numbers of CBS instruments from unauthorized deal-

ers back to the authorized dealer who had transshipped

the item. (/d. pp. 56-58). Mr. Bull testified similarly,

adding that the service center did most of the tracing.

(Bull Deposition, 46-47). The inference can be drawn

that CBS’s purpose in tracing serial numbers was to

exert pressure on those dealers who were violating CBS

policy.

There is also some evidence that CBS exerted pres-

sure on transshipping dealers by creating “nonexistent

credit problems” which had the effect of temporarily

cutting off their supply of CBS instruments. (Current

* The original version erroneously stated that Olsen became

an authorized CBS dealer in 1975. See footnote 8, supra.

82a

Deposition, Vol. I, pp. 61-64). However, Current testi-

fied that she was unaware of any dealer who had his

dealership terminated because of his willingness to

transship. (Current Deposition, Vol. 1, pp. 47-48). Fur-

thermore, Doug Browne testified that if CBS had cre-

ated any credit problems during the relevant period

herein, those problems arose from the sale of a piano

to a band in Wichita, Kansas. (Browne Deposition, Vol.

V, pp. 1248-53).

The court finds that during the relevant period here-

in CBS had a policy that disfavored transhipment of

CBS products to unauthorized dealers. The court fur-

ther finds from the evidence that this was a nationally

applied policy to protect individual CBS dealers such

as Progressive and which was aiso based in part on the

desire to minimize difficulties in handling warranty

claims and to ensure that purchasers of CBS products

had ready access to adequate repair service. (See Cur-

rent Deposition, Vol. I, p. 59; Bull Deposition).

15. Progressive conspired with CBS and Herger to

boycott Olsen from obtaining CBS products from Pro-

gressive, Browne, and Herger.’° The court has found

that an agreement existed between Progressive and

Herger to fix CBS prices at levels higher than on the

CBS price list, (see Finding No. 8). After careful re-

flection, the court finds that this agrement also ex-

©The original version found no conspiracy to boycott. A

further review of the evidence has compelled the court to the

conclusion that Olsen has presented sufficient evidence, when

viewed together in light of all the evidence presented at trial,

to establish the conspiracy. A substantial revision of the orig-

inal version Findings *15 and *16 has been made. New Find-

ing *16 deals with damages arising from the boycot conspiracy.

88a

tended to boycotting Olsen from obtaining CBS pro-

ducts. (Transcript, Vol. I, p. 215). As a further step

of the conspiracy it was necessary to boycott Olsen in

order that the high prices set by Progressive and Her-

ger could be maintained and not be undercut by Olsen,

who was selling CBS products at 85% of the suggested

retail price.

The involvement of CBS in the conspiracy is made

evident by Herger’s testimony. She stated that the pol-

icy directing that she not resell Fender (CBS) products

was “one and the same” with CBS and Progressive.

(Transscript, Vol. I, p. 215). She further explained

that the policy was one and the same “because I felt

that Mr. Penman was dictating to Mr. Driver [the

CBS representative for Utah] how things should run

in Utah.” (/d.) Herger stated that she handled the

sale of one instrument to Olsen in the way she did,

rather than in the traditional wholesale context, be-

cause of the price-fixing agreement. (Transcript, Vol.

I, p. 220). She had previously had her supply of CBS

instruments temporarily terminated for non-compli-

ance with the price-fixing agreement. (Jd. pp. 220-21).

Progressive has argued that Olsen never tried to buy

CBS products from Progressive and only tried once

with Herger. Nevertheless, the evidence has made clear

that Olsen realized that such a request would be futile

— as the one experience with Herger proved to be (in

the sense that the difficulty involved and the high price

charged by Herger made it unrealistic from a business

standpoint to deal on that basis).

Both Progressive and Herger may have had their

independent reasons for boycotting Olsen. Progressive

was a direct competitor of Olsen and had a different

34a

philosophy concerning pricing. Herger stated that she

had an independent prejudice against giving competi-

tive dealers large discounts. (Transcript, Vol. I, pp.

207 ; 223-26). Nevertheless, it is clear that Herger was

in a different market area from Olsen so that she

might have been amenable to deal with Olsen on oc-

casion, but for the agreement with Progressive.

Doug Browne testified at the trial regarding a

conversation with Robert Bull in early 1974 about

Browne’s shipment of CBS products to Olsen.

Mr. Bull told me that he did not have the right

to tell me who { could and could not sell to but

that it was the desire of CBS to control its distri-

bution through authorized dealers, at which time

I said I had no desire to interrupt their distribu-

tion policies.

So, he explained to me that based on dealings—

Very briefly let me relate that: He told me that

Clair Olsen was trouble. In fact, I believe the

quote was “This guy is trouble.”

* * *

Q. Did he elaborate on why he thought Clair

Olsen was trouble?

A. Not really. He just said that some of my mer-

chandise had appeared there, and we didn’t really

get into it why or how he determined that some

of my merchandise had appeared there, but the

way that Fender traces the flow of their mer-

chandise is known to most people, and they had

evidently found that a serial number sold to me

originally had appeared in Utah and that the log-

ical way that it got there was by me selling it to

Clair Olsen and that he would appreciate it if I

would not interfere with their distribution policy,

35a

although again relating to me that he had no right

to formally ask that, and at no time did he tell

me not to sell to Clair Olsen.

(Transcript, Vol. V, pp. 1241-42). Browne also testi-

fied a few minutes later as follows:

Well, as mentioned, in the discussion he advised

me that Clair Olsen was not an authorized dealer

and that he was trouble for authorized dealer or

dealers that he had in the territory, and it was

against his wishes that I sell them.

(Id. p. 1246). Browne also testified that the insinua-

tion was made that if he continued to sell to Olsen, his

supply would be cut off as before, so he stopped selling

to Olsen for a period of one to one and a half years.

(Transcript, Vol. V, pp. 1246-47). At that time, Her-

ger and Progressive were the only authorized CBS

dealers in Utah. After reivewing all the evidence to-

gether, the court is persuaded that Bull exerted pres-

sure on Browne as a result of an agreement with Pen-

man and as part of a broader policy to protect dealers

such as Progressive. CBS’s action toward Browne was

consistent with CBS’s actions toward him concerning

similar sales on other occasions to dealers in other

states. (See Daily Transcript, Vol. V, p. 1272, lines

1-3). This, however, does not significantly detract from

the court’s finding that CBS applied pressure to stop

Browne from transshipping to Olsen pursuant to the

wishes of Progressive.

[Predatory Intent]

As additional proof of the conspiracy, Olsen pro-

duced evidence at trial to prove that Progressive har-

bored a predatory intent toward competing dealers.

36a

The inference Olsen would have the court draw from

this evidence is that this predatory intent made it likely

that Progressive conspired with CBS and other dealers

to deprive Olsen of CBS products. The evidence in this

regard involves four incidents. Concerning the first,

Olsen testified that Penman telephoned him in 1972

and in effect threatened to put him out of business.

However, he also testified that Penman said he did not

intend to retaliate, but that Olsen should think things

through carefully before proceeding with the lawsuit

against Best. (Preliminary Injunction Transcript, pp.

40-41), Penman’s testimony presented a different ver-

sion — basically, that the conversation involved Pen-

man’s offer to help resolve a conflict between Olsen and

Best. Olsen urges the court to draw an adverse infer-

ence against Progressive for its failure to call Best,

who was present during the conversation and heard

Penman’s side of the conversation. Although Best’s tes-

timony may have cleared up some of the discrepancies,

he was available as a witness to both parties and the

court will not draw the adverse inference. On the whole,

the court finds Penman’s version to be more reliable.

Even so, it does leave the court with some degree of

evidence which might imply Penman had a predatory

intent toward Olsen.

The second and third incidents presented by Olsen

involved statements by Progressive to Jerrold McKean.

In one, Penman indicated he was trying to get Fender

guitars taken away from Mrs. Herger so that he could

be the only major dealer in the area. In the other, he

testified that Penman told him he was going to call the

factory because evidently some guitars had been “ship-

ped through by mistake” to Glenn Brothers Music. The

court observes that McKean’s testimony was impeach-

ed — revealing a prejudice against Penman arising

37a

out of two lawsuits with Penman. (Transcript of May

4, 1979, pp. 9-12, 49-51). The fourth incident involves

testimony of Michael Draper that he heard people at

Progressive say that Progressive should stop buying

products from ARP and Cerwin Vega because they

were supplying Olsen. (Transcript, Vol. I, p. 2, lines

5-10; Transcript of April 30, 1979, pp. 71, 114). This

last statement occurred after this suit was filed, how-

ever, and the record shows that during the relevant

period, Progressive carried many of the same lines as

Olsen. Furthermore, Olsen’s own damage study shows

that Progressive in fact continued to buy products from

both ARP and Cerwin Vega after this incident oc-

curred.

The above incidents do show a predatory intent on

the part of Progressive, which lends support to many

of the inferences drawn heretofore leading to the over-

all conclusion that a conspiracy to boycott Olsen existed

among Progressive, CBS, and Herger. The scope of

that conspiracy extended to prevent Olsen from obtain-

ing product from at least Progressive and Herger dur-

ing the damage period, and from Browne during a one

and one-half year period beginning approximately in

the spring of 1974.

[Damages]

16. Olsen has proposed a damage theory claiming

lost profits caused by the boycott conspiracy. It is based

upon Olsen’s market share of CBS products in the Utah

market during 1975, a base year in which Olsen had

free access to CBS products. This share is then related

back over the damage period years. The court finds

the basic approach to be a reasonable one; however,

several significant factors are not taken into account

38a

by the proposed damage study. The court therefore

adopts the study subject to the significant modifica-

tions described hereafter.

The court finds that Olsen has met his burden of

proving the ‘act of injury. inferences can be drawn

that the boycott conspiracy foreclosed at least two ave-

nues of supply, Herger and Browne, from which in-

jury occurred. It is true that Olsen was apparently able

to purchase CBS products from many sources at dis-

counts as large as 60% of the list price. Olsen bought

CBS instruments during the 1971-1975 period from

BGK Enterprises, California Music, Leo’s Musical In-

struments, Freeport Music, and Bobby Music. (Tran-

script, Vol. VII, p. 1778; Exhibits P-241 to P-244). It

is unclear from direct evidence the extent to which the

conspiracy prevented Olsen from buying all the CBS

products he otherwise would have bought — especially

in light of other avenues available to Olsen from which

he could obtain CBS products. The uncertainty arising

from this factor is a burden the defendants must either

clarify or bear. Bigelow v. RKO Radio Pictures, Inc.

[1946-1947 TRADE CASEs {| 57-445], 327 U.S. 251, 265

(1946).

[Market Forces]

Several market forces were in effect during the times

relevant herein. During the early 1970’s CBS products

were in extremely high demand, and the evidence

showed that the manufacturer had a difficult time

keeping up with the demand. In about 1974-1975 the

demand began to slacken due to the emergence of sev-

eral other brands which began to compete effectively

with CBS products. The year 1975 was also a some-

what less productive year economically for the market-

39a

place in Utah. These observations would tend to make

Olsen’s damage study more conservative in the sense

that potential sales for the product were more likely

during the damage period. However, the periodical

shortness of supply would have made it more difficult

to obtain products from other dealers who would na-

turally prefer to sell the same item at full retail if

supply is limited. Since these factors have not been

quantified in the evidence and have the effect of can-

celling each other out, no adjustment is made for them.

Prior to April 2, 1974, Olsen operated his business

on a part-time basis, p:imarily during peak business

hours. (Transcript, Vol. VIII, p. 1890). In late 1974

or early 1975 he moved his business to a larger store

in Kaysville, Utah, which more than doubled his space.

(Transcript, Vo. VIII, pp. 1894-96). The move was in

the same general location, several doors down the

street. Thus, during the base year, 1975, Olsen was

operating in a substantialy different mode than during

most of the damage period. The damage study of Olsen

(Exhibit 248) does not adjust for this significant fac-

tor. The reason given is that Olsen would have made

such a move earlier if CBS products had been freely

available to him. The court rejects this assumption as

too speculative.

It is necessary, therefore, to assign a value to the

increase in Olsen’s business in 1975 which would be

attributable to the larger store and to his going full-

time. No direct evidence on this point was introduced

at trial. It is reasonable to infer, however, that these

changes in operation must have had significant impact

upon the business. In assessing the value of such im-

pact, the court gives weight to the following factors:

1) Olsen had a viable business in operation with a de-

veloping clientele before the move; 2) selling time and

40a

display space were basically doubled within the same

basic location, and 3) other factors, except the boycott

conspiracy, remained about the same. The court deems

it a conservative estimate that 30% of total sales in

the business in 1975 was attributable to the extra hours

worked and the larger space of the new location. Ac-

cordingly, the sales of the base year, 1975, are dimin-

ished by 30% to reflect the role of the extra hours and

space.

Another assumption of the damage study is that, but

for the conspiracy, Olsen could have obtained CBS pro-

ducts at the authorized dealer cost, which was 50%

of the retail list price (See Transcript, November 12,

1980, p. 102). This assumption is not supported by the

evidence. Accordingly, an adjustment is made in the

damage study to reflect that Olsen’s purchases during

the damage period would have been at 60% of list

rather than 50%. This is accomplished by omitting

lines 7 and 8 from Exhibit A-30.

The court finds that Progressive’s Exhibit A-30 is

the most accurate embodiment of Olsen’s damage the-

ory — as far as it goes — and therefore the court uses

this exhibit as a reference point to make the above

noted adjustments. This exhibit correctly employs 1975

sales of CBS products by Olsen (rather than purchas-

es), which the parties stipulated were $27,000 for that

year.

With the above adjustments in mind, the court finds

that the damages resulting from the boycott conspir-

acy are determined as follows:

4la

Line

liem

1971 1972 1973 1974 1975 No.

(Dollars) (Base Year)

Total Purchases of CBS Instru-

ments in the State of Utah other

than Plaintiffs’ at Whlse. Value. $ 97,234 $86,806 $88,410 $ 97,922 $68,348 1

Plaintiffs’ Sales of CBS Instru-

ments Adjusted to Whlse. Value $ 6,456 $ 4,489 $ 5,717 $ 10,612 $15,882 2

Total CBS Instrument Market at

Wholesale Value nik $103,690 $91,295 $94,127 $108,534 $84,230 3

Guitar City’s Estimated Share of

the CBS Instrument Market at

Wholesale Value (18.86%)... $ 19,556 $17,218 $17,752 $ 20,469 0

Less: Adjustment Factor of 30% .70 .70 .70 .70 0 4a

to Reduce Base Year to Equiv-

alent of Part-time Operation

and Half as much Selling Space.. $ 13,689 $12,052 $12,426 $ 14,328 0 4b

Less: Plaintiffs’ Sale of CBS In-

struments Adjusted to Whole-

sale Value (Same as Line Item

~

#2 Above) 6456 4,489 5,717 10,612 0 5

Wholesale Value of Sales Lost

Line 4b minus Line 5) ......... $ 7,233 $ 7,563 $ 6,909 $ 3,716 0 6

Plus: Guitar City’s Average Mark-

up on Transshipment Market 3665 3665 .4660 4478 5677 9

Instrument Purchase .0.......000 $ 2,651 $ 2,772 $ 3,220 $ 1,664 0 10

Retail Value of Lost Saleg................ $ 9,884 $10,335 $10,129 $ 5,380 0 11

Less: Purchases-Transshipment

Market Value (Cost) .....0...c00css $ 7,223 $ 7,563 $ 6,909 $ 3,716 0 12

Less: Additional Variable Expen-

ses (10.65%) (Reduced by 20%

from Exhibit A-30 in Accord-

ance with Adjustment in Lines

4a and 4b above) ooocccocccoonnmnnn $ 1,602 $ 1,556 $ 1,579 $ 1,277 0 13

Net Income L988... women $ 1,059 $ 1,216 $ 1641 $ 387 0 14

An explanation of the line item numbers can be found

in Plaintiffs’ Brief Regarding Damage Proof, filed

October 2, 1980.

The foregoing formula yields a net loss of profit for

the years of 1971 to 1974 of $4,303.

Conclusions of Law

1. The court has jurisdiction over the subject mat-

ter of this action pursuant to 15 U.S.C. §§ 1, 2, 15

(1976) (the monopoly claims have been dismissed pre-

42a

viously) ; 28 U.S.C. § 13831 (1976). The parties have

stipulated in the Pretrial Order that the court has jur-

isdiction over them.

2. Venue is properly laid in the Central Division of

this court pursuant to 15 U.S.C. § 22; 28 U.S.C. § 1391

(1976).

3. The running of the statute of limitations was

tolled by the filing of this action on April 18, 1975,

and the relevant statutory period began on April 18,

1971. See 15 U.S.C. § 15b.

4. The interstate commerce requirement of 15 U.S.

C. §1 is met by the facts of this case because the busi-

ness of CBS, Olsen, Progressive, Herger and Browne

involve interstate commerce within the meaning of

that section. See Hospital Building Co. v. Trustees of

Rex Hospital [1976-1 TRADE CASEs {| 60,885], 425 U.S.

738, 743-46 (1976); U. S. v. Cadillac Overall Supply

Co. [1978-1 TRADE CASES {| 61,892], 568 F. 2d 1078,

1082 (5th Cir.), cert. denied, 437 U.S. 903 (1978).

5. Based on its finding that Progressive and Herger

agreed to divide territories and to fix high retail prices

on CBS products, the court concludes that Progressive

thereby conspired to restrain trade or commerce in vio-

lation of Section 1 of the Sherman Act, 15 U.S.C. {1

(1976). This is a per se violation since it involves price

fixing. However, having found that Olsen suffered no

injury as a result of the Progressive-Herger price fix-

ing conspiracy, the court concludes that Olsen is not

entitled to any damages on this conduct. See Rea v.

Ford Motor Co. [1974-1 TRADE CASES { 75,029], 497

F. 2d 577, 589 (8rd Cir. 1974).

48a

6. In light of the court’s findings that Progressive

did not conspire with others to prevent Olsen from be-

coming a CBS dealer, or to terminate Olsen as a CBS

dealer, the court rules that as to these various grounds

Progressive has not violated Section 1 of the Sherman

Act, and therefore is not liable for damages on these

bases.

7. The court has found that Progressive conspired

with Herger and CBS to boycott Olsen from receiving

CBS products which caused Olsen to suffer a net loss

of profits in the amount of $4,303 for the years 1971

to 1974."" The court concludes that Progressive thereby

conspired to restrain trade or commerce, in violation

of Section 1 of the Sherman Act, 15 U.S.C. § 1. Under

15 U.S.C. § 15, Olsen is entitled to recover treble dam-

ages in the amount of $12,909 from Progressive, toge-

ther with costs and a reasonable attorney’s fee.

APPENDIX C

CONSTITUTIONAL AMENDMENT INVOLVED

The 5th Amendment provides: No person shall be

held to answer for a capital, or otherwise infamous

crime, unless on a presentment or indictment of a

Grand Jury, except in cases arising in the land or naval

forces, or in the Militia, when in actual service in time

of War or public danger; nor shall any person be sub-

ject for the same offence to be twice put in jeopardy

of life or limb; nor shall be compelled in any criminal

case to be a witness against himself, nor be deprived

of life, liberty, or property, without due process of law;

nor shall private property be taken for public use, with-

out just compensation.

"This conclusion has been changed from the original to

reflect the court’s finding that Progressive is liable for damages

arising from a consniracy to boycott Olsen.

44a

The 14th Amendment provides: Section 1. All per-

sons born or naturalized in the United States, and

subject to the jurisdiction thereof, are citizens of the

United States and of the State wherein they reside.

No State shall make or enforce any law which shall

abridge the privileges or immunities of citizens of the

United States ;nor shall any State deprive any person

of life, liberty, or property, without due process of law;

nor deny to any person within its jurisdiction the equal

protection of the laws.

STATUTES INVOLVED

Section 1 of the Sherman Act 15 U.S.C. § 1, pro-

vides: Every contract, combination in the form of trust

or otherwise, or conspiracy, in restraint of trade or

commerce among the several States, or with foreign

nations, is declared to be illegal.

Section 2 of the Sherman Act 15 U.S.C. § 2 pro-

vides: Every person who shall monopolize, or attempt

to monopolize, or combine or conspire with any other

person or persons, to monopolize any part of the trade

or commerce among the several States, or with foreign

nations, shall be deemed guilty of a misdemeanor, and,

on conviction thereof, shall be punished by fine of not

exceeding fifty thousand dollars, or by imprisonment

not exceeding one year, or by both said punishments,

in the discretion of the court. July 2, 1890, ¢. 647, § 2,

26 Stat. 209; July 7, 1955, ce. 281, 69 Stat. 282.

Section 43(a) of the Lanham Act 15 U.S.C. 1125 (a),

provides: (a) Any person who shall affix, apply, or

annex, or use in connection with any goods or services,

or any container or containers for goods, a false desig-

nation of origin, or any false description or represen-

45a

tation, including words or other symbols tending falsely

to describe or represent the same, and shall cause such

goods or services to enter into commerce, and any per-

son who sell with knowledge of the falsity of such

designation of origin or description or representation

cause or procure the same to be transported or used in

commerce or deliver the same to any carrier to be trans-

ported or used, shall be liable to a civil action by any

person doing business in the locality falsely indicated

as that of origin or in the region in which said locality

is situated, or by any person who believes that he is or

is likely to be damaged by the use of any such false

description or representation.

28 U.S.C. 1838 provides ‘“(b) The district courts

shall have original jurisdiction of any civil action as-

serting a claim of unfair competition when joined with

a substantial and related claim under the copyright,

patent, plant variety protection or trade-mark laws.”

RULES INVOLVED

Rule 8(e) provides: (2) A party may sev forth

two or more statements of a claim or defense alter-

nately or hypothetically, either in one count or defense

or in separate counts or defenses. When two or more

statements are made in the alternative and one of them

if made independently would be sufficient, the plead-

ing is not made insufficient by the insufficiency of one

or more of the alternative statements. A party may

also state as many separate claims or defenses as he

has regardless of consistency and whether based on

legal, equitable, or maritime grounds. All statements

shall be made subject to the obligations set forth in

Rule 11.

46a

Rule 41(b) provides: For failure of the plaintiff to

prosecute or to comply with these rules or any order of

court, a defendant may move for dismissal of an action

or of any claim against him. After the plaintiff, in an

action tried by the court without a jury, has completed

the presentation of his evidence, the defendant, with-

out waiving his right to offer evidence in the event

the motion is not granted, may move for « dismissal

on the ground that upon the facts and the law the plain-

tiff has shown no right to relief. The court as trier of

the facts may then determine them and render judg-

ment against the plaintiff or may decline to render any

judgment until the close of all the evidence. If the

court renders judgment on the merits against the plain-

tiff, the court shall make findings as provided in Rule

52(a). Unless the court in its order for dismissal other-

wise specifies, a dismissal under this subdivision and

any dismissal not provided for in this rule, other than

a dismissal for lack of jurisdiction, for improper venue,

or for failure to join a party under Rule 19, operates

as an adjudication upon the merits.

Rule 52(a) provides: (a) Effect. In all actions tried

upon the facts without a jury or with an advisory jury,

the court shall find the facts specially and state separ-

ately its conclusions of law thereon, and judgment shall

be entered pursuant to Rule 58, and in granting or

refusing interlocutory injunctions the court shall simi-

larly set forth the findings of fact and conclusions of

law which constitute the grounds of its action. Re-

quests for findings are not necessary for purposes of

review. Findings of fact shall not be set aside unless

clearly erroneous, and due regard shall be given to the

opportunity of the trial court to judge of the credibility

of the witnesses. The findings of a master, to the ex-

47a

tent that the court adopts them, shall be considered as

the findings of the court. If an opinion or memoran-

dum of decision is filed, it will be sufficient if the find-

ings of fact and conclusion of law appear therein. Find-

ings of fact and conclusions of law are unnecessary on

decisions of motions under Rules 12 or 56 or any other

motion except as provided in Rule 41(b).

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APPENDIX D

WHOLESALE SALES VOLUME TO UTAH

DEALERS OF FENDER AND RHODES

PRODUCTS

1973 1974 1975 1976 1977 Totals

— ——— (Dollars) — — — —

(1) (2) (3) (4) (5) (6)

Herger Music .......... $11,269 $18,719 $12,345 $ 7,574 $ 2,847 $ 52,754

Progressive Music .. 55,523 66,358 41,560 42,096 14,574 220,111

Cal’s Music Box ...... _— — — 5,614 5,603 11,217

Hart Brother ............ _ _ _ 53,190 26,962 80,152

Lynn’s Music ............ —_ — _— _ 4,802 4,802

TORRES | isiiciicctea $66,792 $85,077 $53,905 $108,474 $54,788 $369,036

Progressives %

Oe Mee cach 83.18% 78% 77.1% 38.81% 26.6% 59.64%

Source: Year End Report, “Fender Domestic Sales

In Dollars by Territory,” 1973-1977.

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CERTIFICATE OF SERVICE

The undersigned, a member of the bar of the United

States Supreme Court, has caused to be served three

(3) copies of the within Petition for Writ of Certiorari

to the United States Court of Appeals for the Tenth

Circuit, upon the following counsel of record:

STEPHEN G. CROCKETT

ROOKER, LARSEN, KIMBALL & PARR

185 South State Street

Suite 13800

Salt Lake City, Utah 84111

Attorneys for Defendant Progressive

BRYCE E. ROE

RoE & FOWLER

340 East 400 South

Salt Lake City Utah 84111

Attorneys for Defendant Norlin

CuRTIS L. FRISBIE, JR.

MARK W. BAYER

1500 Diamond Shamrock Tower

Dallas, Texas 75201

Attorneys for Defendant Peavey

JUN 15 1993