Petition for a Writ of Certiorari — Agrashell, Inc. v. Hammons Products Co.

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In the Supreme Court of the United States

No. 7 9= 140 |

AGRASHELL, INC.,

Petitioner,

vs.

HAMMONS PRODUCTS COMPANY,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

ALBERT C. JOHNSTON

230 Park Avenue

New York, New York 10017

Douctas STRIPP

1006 Grand Avenue

Kansas City, Missouri 64106

Attorneys for Petitioner

Of Counsel:

Pau. R. LAMOREE

1006 Grand Avenue

Kansas City, Missouri 64106

Guy W. SHoup

230 Park Avenue

New York, New York 10017

July 9, 1973

BP. L. Mewpennatt, Inc., 926 Cherry Street, Kansas City, Mo. 64106, 421-3080

PEP ELSE LAETITIA BH WT Lanse

TABLE OF CONTENTS

Opinions Below 2

Jurisdiction 2

‘ Questions Presented—

1. Can the fact of damage requirement for a

treble damage claim which alleged loss of profits

be made where the only evidence that claimant has

been injured in its business or property was an

economist’s damage theory that was negated as to

its major assumptions and was also found to have

“many practical defects” constituting “serious fail-

ings” of proof, particularly where the claimant

demonstrated neither significant efforts nor a

capacity to secure any of the business involved in

the contracts held to be in restraint of trade? ........ 2

2. Does a contract with a commission sales

agent merely for the distribution of a product

warehoused and priced by the manufacturer—the

manufacturer’s only contract of its kind, and term-

inable annually on 60 days notice by either party

—become in violation of Section 1 of the Sherman

Act, for having “extended the life of the patent”,

upon continuing in effect after the expiration of

a patent for the product concerned?

Statutory Provisions

Statement of the Case—

A. Proceedings in the Court Below

B. The Operative Facts

1. Agrashell’s business

2. The Wheelabrator contract

Irn RD w

ped .

3. The Pangborn contract 7

4. Hammons and other SGA manufacturers 8

5. Proof as to the contracts and damage ........ 8

Reasons for Granting the Writ—

I. As to Question 1—

The decision below dangerously vitiates the

“fact of damage” requisite of treble damage

claims under Section 4 of the Clayton Act, by

sustaining a jury’s award of “lost profits”

_ based solely on an economist’s ‘assumptions

which the Court found highly defective ........ 10

II. As to Question 2—

A. The decision below departs drastically

from established law by outlawing a sin-

gle agency contract for sales on commis-

sion of a manufacturer’s product at his an-

nounced price. Unless corrected, the rul-

ing will have far-reaching effects upon

beneficial selling arrangements that foster

trade and customer service 17

Q B. The ruling has created a new but inex-

plicable doctrine, and has let it turn a

lawful contract into illegal conduct ex

post facto, by holding that a mere sales

agency agreement could have “extended

the life of the patent” and thus consti-

tuted a Sherman Act violation upon con-

tinuing in effect beyond the expiration

of a patent for the product concerned .... 20

Conclusion 22

Appendix A: Opinion of the Court of Appeals .... App. 1

PEN OS LS RIN TERS NE A ER

Appendix B: Agrashell-Wheelabrator contract of No-

vember 1, 1950 App. 35

Note: Unless otherwise indicated, all emphasis is

supplied and all bracketed material added.

Table of Authorities

. CASES

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

(1946) 15

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

273 U.S. 359 (1927) 15

Herman Schwabe, Inc. v. United Shoe Machine Corp.,

297 F.2d 906, 910 (2d Cir., 1962) 16

Perma Mufflers v. Int'l Parts Corp., 392 U.S. 134

(1967) 12

Simpson v. Union Oil Co., 377 U.S. 13 (1964) ........ 18, 19, 20

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

282 U.S. 555 (1931) 15

United States v. General Electric Co., 272 US. 276

(1926) 18, 20

Zenith Corp. v. Hazeltine, 395 U.S. 100 (1968) ............ 12

STATUTES

Sherman Act, Sec. 1, 15 U.S.C. §1 2,3

Clayton Act, Sec. 4, 15 U.S.C. §15 1,3, 11, 12

28 U.S.C. §1254(1) 2

28 U.S.C. §1337 2

28 U.S.C. §2101(c) 2

In the Supreme Court of the United States

No. 72-______

AGRASHELL, INC.,

Petitioner,

vs.

HAMMONS PRODUCTS COMPANY,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Petitioner Agrashell, Inc. (“Agrashell”) prays that a

Writ of Certiorari issue to review the judgment of the

United States Court of Appeals for the Eighth Circuit

in the above-entitled case so far as it affirmed that part

of a judgment of the District Court awarding respondent

Hammons Products Company (“Hammons”) treble dam-

ages in the amount of $125,250 for “loss of profits” result-

ing from violations of Section 1 of the Sherman Act (15

U.S.C. §1).

OPINIONS BELOW

The opinion of the Court of Appeals, reported at 476

a and 177 USPQ 401 (1973), is reproduced as

Appendix A infra.

pots pial OT eS SEE

Se, eh wees easiness

Te TE ae RRR re

Opinions of the Court of Appeals and the same Dis-

trict Court after earlier trial of this case to the court on

the issues of validity, infringement and enforceability of

petitioner’s patent are reported, respectively, at 413 F.2d

89 (8th Cir. 1969, Opinion by Judge Blackmun) and 279

F. Supp. 522 (W.D. Mo. 1967).

JURISDICTION

This petition concerns a counterclaim based on the

Anti-Trust laws of the United States, 15 U.S.C. §1, et

seq. The courts below had jurisdiction by reason of 28

U.S.C. §1337.

The jurisdiction of this Court is invoked under 28

U.S.C. $1254 (1).

This petition is timely filed under 28 U.S.C. §2101 (c).

The judgment of the Court of Appeals was entered on

March 30, 1972 and a timely filed petition for rehearing

was denied on May 1, 1973.

QUESTIONS PRESENTED

1. Can the fact of damage requirement for a treble

damage claim which alleged loss of profits be made where

the only evidence that claimant had been injured in its

business or property was an economist’s damage theory

that was negated as to its major assumptions and was

also found to have “many practical defects” constituting

1. In a still earlier phase, Agrashell, Inc. v. Hammons Pro-

ducts Co., 248 F. Supp. 258 (W.D. Mo. 1965), aff’d 352 F.2d 443

(8th Cir. 1965), Agrashell as exclusive licensee was held not en-

titled to sue for infringement in its own name without joining the

nominal patent owner as a party. This procedural defect was

cured before the present action was brought.

i OES NOL ERIE. NG MES ES 6 SIRI

“serious failings” of proof, particularly where the claim-

ant demonstrated neither significant efforts nor a capacity

to secure any of the business involved in the contracts

held to be in restraint of trade?

2. Does a contract with a commission sales agent

merely for the distribution of a product warehoused and

' priced by the manufacturer—the manufacturer's only con-

tract of its kind, and terminable annually on 60 days no-

tice by either party—become in violation of Section 1 of

the Sherman Act, for having “extended the life of the

patent”, upon continuing in effect after the expiration of

a patent for the product concerned?

STATUTORY PROVISIONS

Sherman Act, Sec. 1, 15 U.S.C. §1:

Every contract, ... in restraint of trade or commerce

among the several States, . . . is hereby declared to

be illegal.

Clayton Act, Sec. 4, 15 U.S.C. §15:

» +. any person who shall be injured in his business or

property by reason of anything forbidden in the anti-

trust laws may sue therefor . . . and shall recover

threefold the damages by him sustained ...

STATEMENT OF THE CASE

A. Proceedings in the Courts below

This action was commenced in 1965 by petitioner

Agrashell for damages for past infringement of an expired

patent (Re. 23,422) which Agrashell had acquired by as-

signment. The patent was granted in 1947 for a discov-

ery by Frank R. Perry of a method of cleaning metal ar-

ticles by blasting against them ground nutshells of certain

hardness and sizes and for the specially sized ground hard

nutshell material.

Upon answering the complaint in 1966, Hammons

counterclaimed for antitrust damages and for a declara-

tory judgment of invalidity, non-infringement and unen-

forceability of the patent, demanding attorneys fees [App.

I, 26-29]. The alleged antitrust violation involved, inter

alia, charges that Agrashell had an “exclusive purchase

and price fixing contract” with American Wheelabrator

and Equipment Corporation (“Wheelabrator”) and also

one with Pangborn Corporation (“Pangborn”) [App. I,

43-45, 56-57].

Neither party demanded a jury.

The action proceeded in 1967 to trial to the Court on

all issues. During that trial, Hammons presented evidence

and rested on the validity, infringement and misuse issues,

claiming attorneys fees on the basis of them. Both the

Wheelabrator contract and the Pangborn contract, whose

construction and effect form the basic operative facts of

this petition, were placed in evidence. When Hammons

then announced readiness to proceed on the antitrust dam-

age claim, the Court ordered the trial continued to enable

discovery by Agrashell on new damage theories that had

been asserted by Hammons just before the trial [App. III,

1050, 1054-1057].

In post-trial briefs and proposed findings, Hammons

‘urged the Court to find patent misuse in the Pangborn and

Wheelabrator contracts because they “extend[ed] the

patent monopoly beyond its expiration date”, and accord-

ingly to award attorneys fees [App. I, 75, 85-91, 95].

RAL,

ada srelteetetll eet

MR remeron PELE L ARI LRT ERVE SN BOC LOIS TE ROIS OO A RE RNP NG LENE LIM — Seay

By a memorandum decision and judgment entered in

November, 1967, the District Court dismissed the claim for

patent infringement and denied the claim for attorneys

fees [App. I, 103]. No misuse was found. Agrashell v.

Hammons, 279 F. Supp. 522 (1967). Appeals were taken

by both parties, and the judgment was affirmed. Agra-

. Shell v. Hammons, 413 F.2d 89 (1969).

Eighteen months after the service of the answer pre-

senting the counterclaims and six months after the District

Court’s 1967 judgment, Hammons moved for a jury trial of

the antitrust counterclaim—upon no factual showing other

than it had changed from patent counsel to antitrust coun-

sel, The motion was granted over strenuous objections

based on the prior waiver and the prior trial of the patent

misuse issues [App. I, 104, 111-113] +

Trial of the counterclaim was to a jury. In its course,

the Court stated inadvertently before the jury that “The

patent [Agrashell’s Perry patent] was determined legally

by the Court of last resort as an illegal patent” [App. II,

290 T].

In instructing the jury, the trial Court referred to al-

legations that Agrashell controlled the prices of its soft

grit abrasive materials, and stated:

“Now, there was not evidence that if that happened,

that that damaged Hammons in any way because there

wasn’t any evidence that they sold it below cost or to

run Hammons out of the market.” [989 =

The jury returned a verdict of $162,374.21 for patent

litigation expenses and $41,750.00 for loss of profits, which

the district court increased to $775,733.76 by trebling those

amounts and adding $150,000.00 for attorneys’ fees and

$13,361.31 for costs.

The Court of Appeals reversed the judgment for pat-

ent litigation expenses, ruling that Hammons “did not make

a submissible case under Section 2 of the [Sherman] Act”

[Opinion, p. 15]. It left standing the judgment for “loss

of profits”.

All of Hammons’ various allegations of illegal conduct

by Agrashell were held by the Court of Appeals to be

untenable as a basis for the jury verdict, excepting only

the contracts with Wheelabrator and Pangborn.

B. The Operative Facts

1. Agrashell’s business

Agrashell is a small Los Angeles company which in

the 1930’s pioneered the development of commercial prod-

ucts from waste nut shells.

In 1945 Agrashell entered into the production of hard

nutshell blast cleaning abrasives from apricot pit shells

and black walnut shells, for military use according to

the Perry invention [778-779 T]. This material, trade-

marked as its Shelblast product, became one of a number

of materials referred to as “soft grit abrasive’ (SGA).

In 1947, upon learning that the Perry patent was about

to be issued, Agrashell obtained an exclusive license under

the patent [800 T].

In order to develop the industrial market, which is

located principally in Eastern and Midwest industrial areas,

Agrashell shipped the product in carloads to warehouses

located near the prospective consumers, keeping stocks

there at its own risk and expense, and sought agents who,

for sales commissions, would develop sales and give prompt

service to customers [781-785 T].

‘2

2. The Wheelabrator contract

In 1950, Wheelabrator became a Shelblast selling agent

under a contract which it drafted (856 T), reproduced

as Appendix B infra. By its terms, Agrashell appointed

Wheelabrator as a del credere factor to sell and service

its Shelblast products for a percentage commission on or-

ders it transmitted (| 1, 7). Agrashell agreed to fill

the orders promptly,- failing which Wheelabrator could

obtain similar material elsewhere (| 5). Wheelabrator

would quote the prices announced by Agrashell ( 10).

Either party could terminate the agreement at any

anniversary date by sixty days notice ({ 11).

The Wheelabrator contract contains no mention of any

patent or any patent license other than to hold the agent

harmless from patent infringement ({| 13).

3. The Pangborn contract

In 1962, a suit by Agrashell against Pangborn for

infringement of the Perry patent was settled by Pang-

born’s acknowledgement of the validity of the patent and

its request for an agency to supply Agrashell’s patented

nutshell SGA products. This resulted in the Pangborn

contract, made March 29, 1962 for a term of five years

[737-740 T, 811-815 T]. Its provisions differed from those

of the Wheelabrator contract principally in that (a) Pang-

born did not agree to quote prices announced by Agra-

shell; (b) Pangborn agreed not to deal in nutshell SGA

other than Agrashell’s until June 10, 1964 (the patent

expiration date), after which it could procure other nut-

shell SGA on more favorable terms if Agrashell should

fail to meet them.

EP tas eh ee

eer ane Men coe Peron

A er apn

BEDE TAS RTI IE MEAG

4. Hammons and other SGA manufacturers

Hammons in 1957-1958 entered the market for the

Perry patent material by producing it in and selling direct

from a black walnut shelling plant at Stockton, Missouri.

Hammons’ SGA is made entirely from black walnut shells.

Hammons soon had captured 100% of the large Detroit

area automotive market for the material.

During the alleged damage period at least ten com-

panies other than Agrashell and Hammons manufactured

SGA, and various other companies distributed the mate-

rial [Opinion, p. 4].

Agrashell and Hammons are nearly identical in size.

Hammons’ business prospered and grew during the al-

leged damage period.

5. Proof as to the contracts and damage

The Wheelabrator contract and the Pangborn con-

tract were made twelve years apart. Neither Wheela-

brator nor Pangborn was a consumer of SGA, other than

for demonstration purposes; both were manufacturers of

blast cleaning equipment who simply made the abrasive

available to customers as a service to them.

Agrashell through the contracts and the services of

Wheelabrator and Pangborn was able to supply ultimate

customers who bought in small quantities; their orders

could be delivered promptly in a variety of sizes from

Agrashell’s regional warehouses [Opinion, pp. 22, 24].

Hammons, in contrast, sold direct, or to jobbers for

resale from warehouses owned by the jobbers, or by manu-

facturers’ representatives with orders shipped direct from

Hammons’ plant. Hammons did not maintain regional

warehouse facilities in order to service small orders, and

did not actively solicit them [Opinion, pp. 22, 24].

. .Hammons made no attempt during the alleged damage

period to secure any business from either Wheelabrator

or Pangborn. Its only contacts with Wheelabrator were

in response to some routine sales literature received from

Wheelabrator in 1957 and by a small sale of SGA to

Wheelabrator in 1958. Hammons’ representative visited

Pangborn in 1958 and 1962—before Pangborn was an Agra-

shell agent—but not afterward [Opinion, p. 23].

And, as the Court of Appeals stated:

“More importantly, there was no evidence tend-

ing to show why Hammons could not sell direct or

through agents to the ultimate consumers who were

purchasing from Agrashell through [Wheelabrator

and Pangborn]” [Opinion, p. 23].

The jury award for “loss of profits’ was based solely

upon a theory presented in the testimony of an economist

concerning damages allegedly sustained by Hammons

[Opinion, pp. 14-15]. This theory was based on assump-

tions regarding the effect, as “barriers” to trade, of a num-

ber of circumstances, and did not purport to conclude that

under any hypothetical state of facts Hammons would or

could have secured the business Agrashell did through

Wheelabrator, Pangborn, or any other particular agent.

The economist’s theory assumed that because the

sales by Hammons and Agrashell of different grades of

SGA to a single large purchaser’s plant over a seven-

year period had been in a tonnage ratio of 60:40 (in Ham-

mons’ favor), Hammons but for four assumed “illegal

barriers” would have secured 60 percent of the total SGA

business Agrashell conducted through its principal agents,

enumerated to include Wheelabrator, Pangborn, and

twelve others unrelated to the contracts here in question.

No consideration was given to the differences of customers,

products, service, quantities and delivery needs, nor to

the fact that at least ten other manufacturers and various

distributors were competing in the SGA market.

Most importantly, Hammons adduced no proof that

it even attempted during the damage period to secure any

of the business done by Agrashell through Wheelabrator or

Pangborn, or that its own business in SGA was in fact

injured in any way by the existence of either the Wheel-

abrator contract or the Pangborn contract.

REASONS FOR GRANTING THE WRIT

I. As to Question 1

The decision below dangerously vitiates the ‘“‘fact

of damage’’ requisite of treble damage claims

under Section 4 of the Clayton Act, by sustaining a

jury’s award of “‘lost profits’? based solely on an

economist’s assumptions which the Court found

highly defective.

The primary issue before the Court of Appeals as

stated in its opinion [Appendix A, p. 15] was

“Whether Hammons failed to establish that Agrashell

had violated the Sherman Act and by so doing proxi-

mately injured Hammons.”

The opinion of the Court narrowed that primary issue

by ruling that the only violations which the jury could have

correctly found consisted of violations of Section 1 by the

Wheelabrator contract and the Pangborn contract. These

violations were held to have arisen from the continuance

of the Wheelabrator contract after the Perry patent ex-

pired and from Agrashell’s first option to supply Pang-

born’s requirements of nutshell SGA, which existed under

the Pangborn contract for 2 years and 10 months after

the patent expired.

A basic question then remained under Section 4 of the

Clayton Act as to whether any evidence warranted the

jury’s finding that Hammons’ business was caused losses of

profits by reason of either or both of the contracts. Was

there sufficient evidence that the existence of the Wheel-

abrator contract had injured Hammons’ business? Was

there evidence that its business was injured by reason of

the 3-year supply option provided for Agrashell by the

Pangborn contract?

Upon the opinion of the Court of Appeals, it is appar-

ent that, as a matter of fact, there was no evidence that

Hammons was actually caused any loss of business.

During the alleged damage period, Hammons did not

even solicit business from Pangborn or Wheelabrator

[Opinion, p. 23]. There was no evidence that it actively

solicited [or that it even knew of] the ultimate consumers

who were purchasing from Agrashell through Pangborn or

Wheelabrator [Opinion, pp. 23-24]. In fact, its sales efforts

were “rather ill-suited to acquiring the business” of Pang-

born or Wheelabrator, for Hammons had only one sales-

man; it sold its SGA only by direct shipments from its

black walnut shelling plant in Missouri; and Hammons did

not, while Agrashell did, maintain regional warehouses in

order to provide prompt delivery of small quantities of

various sizes and types of products on orders serviced by

agents [Opinion, pp. 22-24].

There was a total lack of factual evidence that Ham-

mons suffered any injury by reason of the contracts held

forbidden. Quite to the contrary, Hammons prospered in

its own way of doing business, and it demonstrated neither

the intent nor the capacity to even attempt to serve the

TRE CER OL Gt Re ROL an Rs A 5 ; i }

purchasers whose needs were served by Agrashell’s sales

from regionally warehoused stocks with the aid of Wheel-

abrator and Pangborn as provided by their contracts.

Section 4 of the Clayton Act authorizes a recovery

which is available only to a person “who shall be injured

in his business or property by reason of anything forbid-

den in the antitrust laws”. Proof of the fact of at least

some profits having actually been lost because of a viola-

tion found is manifestly prerequisite to a lawful recovery of

threefold an amount claimed as lost profits.

This Court has consistently held to the intent of the

statute:

“Under §4, plaintiff must show not only that the de-

fendant violated the antitrust laws but that his con-

duct caused the damages alleged in the complaint.”

Perma Mufflers. v. Int'l. Parts Corp., 392 U.S. 134,

143 (1967) (Mr. Justice White, concurring).

“.. the fact of damage under §4... is... that

the illegality is shown to be a material cause of the

injury ...” Zenith Corp. v. Hazeltine, 395 U.S. 100,

114 n. 9 (1968).

In the Zenith opinion, this Court held that Zenith

had not met the burden of proof of the fact of damage

as to certain markets and expressed the criteria of such

proof as follows:

“ . . the issue is whether . . . Zenith intended to

enter [the allegedly foreclosed market], had the capac-

ity to do so, and was prevented from entering by

{the unlawful conduct] . . . If Zenith’s failure to

4 enter the English market was attributable to its lack

of desire, its limited production capabilities, or to other

factors independent of HRI’s unlawful conduct, Zenith

i |

would not have met its burden under §4.” (395 US.

at 126-127).

The court below has not applied these or any equiv-

alent criteria to the factual situation carefully set out

in its opinion. Had it applied them, the award for “lost

profits” could not have survived its analysis of the evi-

dence. Thus, Hammons’ failure to seek business from

or through Wheelabrator or Pangborn, or even from’ the

customers they served, demonstrated lack of desire and

intent to secure the portions of the SGA market they

served. Hammons’ way of doing business only by direct

shipment from its plant [also, the fact that it used only

one salesman] demonstrated lack of capability to serve

the customers they served. Hammons’ failure to solicit

the sources of the business Agrashell had and its expert’s

inability to explain why it had not attempted to secure

it [Opinion, p. 24, n. 8] further demonstrated the total

absence of any factual basis for concluding that Hammons

was prevented by the Pangborn contract or by the Wheel-

abrator contract from securing any part of the Agrashell

sales it claimed “it should have had” [Opinion, p. 19].

Instead of adducing any factual proof that its busi-

ness was injured by the contracts, Hammons resorted to

an economist’s theory as its only evidence of the alleged

damage. Its resort to this entirely theoretical basis was

itself a significant indication that there was no evidence

of any actual damage.

The economist’s theory provided no evidence that

Hammons was in fact caused any loss of profits by rea-

son of the Pangborn contract or by reason of the Wheel-

abrator contract. It showed no business relationship at

all, either actual or attempted, between Hammons and

Pangborn, or Hammons and Wheelabrator, or Hammons

SRP THERE SI OWS

and any purchaser of Agrashell’s SGA supplied through

Pangborn or Wheelabratcr.

The Court of Appeals very carefully analyzed some

of the premises and assumptions of the economist’s theory,

pointing out that, although unique, it had “many practical

defects” which constituted “serious failings” and that im-

portant assumptions in it were “highly suspect”, unre-

liable, and “conclusively negated” [Opinion, pp. 21-24].

The Court, however, after pointing out how defective

and unreliable the damage theory really was, proceeded

nevertheless to sustain the jury’s award of lost profits with

this seriously fallacious theory as its only foundation.

The Court failed to observe that Hammons’ sales of

a special grade of SGA direct to a single large purchas-

er’s plant in Columbus, Ohio [i.e., the Hammons part

of the economist’s assumed 60:40 sales ratio], where that

purchaser had had no business relation with either Pang-

born or Wheelabrator, could not by any manner of rea-

soning be considered as evidence of Hammons having been

caused any loss of profits or sales by reason of the Pang-

born contract or by reason of the Wheelabrator contract.

Also, the Court overlooked that under the trial court’s

instruction that there was no evidence that Agrashell’s

alleged control of prices damaged Hammons in any way

(989 T), and in light of its own holding [Opinion, pp. 23-

24] that the higher prices Agrashell’s ultimate consumers

were paying should have made it easier for Hammons to

compete, the pricing provision of the Wheelabrator con-

tract, the only offense found in it, could not have damaged

Hammons. This being so, the “lost profits” award could

not stand on any theory, for the portion of it attributed to

the Pangborn contract by the economist’s theory [DX 595,

596] was at most $16,185 and thus only a fraction of the

verdict of $41,750 for loss of profits.

The Court sustained the “lost profits” award upon

the economist’s theory, although having shown it to be

thoroughly misfounded and incredible; by stating that

“our critique . .. must be tempered .. . by the Supreme

Court’s statements relating to the proper function of an

appellate court when reviewing damage evidence.” Then

the Court [Opinion, p. 25] quoted a passage from Zenith,

395 U.S. at 114 n. 9, and stated that this Court had “con-

sistently reminded critics of damage formulations that

an antitrust violator may not properly complain about

damage proof vagaries when such ambiguity results from

the illegal act itself”, citing two cases.?

The cited reminders of this Court, however, were di-

rected to vagaries of proof of amount of damage. Even

if the unique, palpably misfounded economist’s theory em-

ployed in this case might be tolerated judicially as a basis

for calculating an amount of damages, once the fact of

damage had been proved, there is no warrant in either

Section 4 or any decision of this Court, or in any other

found authority, for permitting such a plainly fallacious

theory to be utilized in place of proof that the treble

damage claimant did in fact suffer at least some injury

proximately caused by a related antitrust violation. As

this Court stated in Story Parchment Co. v. Paterson Parch-

ment Paper Co., 282 U.S. 555, 562 (1931):

“* * * there is a clear distinction between the

measure of proof necessary to establish the fact that

petitioner had sustained some damage, and the mea-

sure of proof necessary to enable the jury to fix the

amount. The rule which precludes the recovery of

uncertain damages applies to such as are not the cer-

2. Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 265

(1946); Eastman Kodak Co. v. Southern Photo Materials Co., 273

US. 359, 379 (1927).

tain result of the wrong, not to those damages which

are definitely attributable to the wrong and only un-

certain in respect of their amount.”

A similarly incredible economist’s theory was ad-

vanced and totally rejected as the basis for a treble dam-

age claim in Herman Schwabe, Inc. v. United Shoe Ma-

chine Corp, 297 F.2d 906, 910 (2d Cir.), cert. denied, 369

U.S. 865 (1962), a case mentioned on page 19 of the opin-

ion below. In Schwabe, Judge Friendly’s opinion recited

principles for judging what evidence is worthy of con-

sideration by a jury, and stated that “the leap required

to derive any rational conclusion from the expert’s data

was too great to allow a jury to take. Many decisions

have rejected evidence of injury and damage comparable

in weight with that submitted here [citing cases].” (297

F.2d at 912).

The decision below is contrary to the plain terms of

§4; it misapplies to the issue of fact of damage principles

stated by this Court in reference to amount of damage;

it overlooks the criteria laid down by this Court for proof

of the fact of damage; it is clearly inconsistent with the

rejection of the same kind of damage theory by the Court

of Appeals for the Second Circuit in the Schwabe case.

Both courts below accepted a “highly questionable”,

“conclusively negated” economist’s theory which has “se-

rious failings” as the sole evidentiary basis for a treble

damage award. This dangerously vitiates the “fact of dam-

age” requisite of treble damage claims under §4. The

ingenuity of man in devising adventuresome theories for

collecting money as treble damages will have few bounds

if the theories acceptable can be based on assumptions

so little related as are those of Hammons’ expert to even

the existence, let alone the effects, of operative facts.

The one success of such a theory can only lead to

more and more cases of claimants seeking to devise like

theories and assert them in treble damage claims. Apart

from the unjust burdens and dangers which thus befall

the targets of the claims, more such claims can ill be

afforded at a time when the courts are already hard pressed

to handle the growing volume of well-founded litigation.

II. As to Question 2

A. The decision below departs drastically from

established law by outlawing a single agency

contract for sales on commission of a manu-

facturer’s product at his announced price. Un-

less corrected, the ruling will have far-reaching

effects upon beneficial selling arrangements

that foster trade and customer service.

In holding the Agrashell-Wheelabrator contract to

have “extended the life of the patent”, and to be “violative

of Section 1 of the Sherman Act” and a “contract in re-

straint of trade”, the Court of Appeals departed funda-

mentally from the common law ‘and from the law long

established in this Court.*

Never before to our information has a finding of

illegal conduct attached to the beneficial practice of pro-

moting the distribution and sale of a manufacturer’s un-

consigned stock of his product by contracting with a com-

3. Although another and different contract with the Pang-

born Corporation was also held unlawful in part, the award of

$41,750 could not be supported on the basis of the Pangborn con-

tract alone. Hammons’ claimed loss of profits with regard to

Pangborn was only $16,185 (per PX 596; the figure was less

under its alternate computation on PX 595); of that, only about

$12,600 accrued during the period after the patent expired, when

the provision the Court of Appeals ruled unlawful was in effect

(June 11, 1964 to March 29, 1967).

se gi Mi ee ee al ne)

‘

mission agent to secure orders for the product at the manu-

facturer’s price.

The Wheelabrator contract (Appendix B) is a sim-

ple, pure sales agency agreement. It involves no con-

signment of goods. It places no restriction upon the agent

beyond normal provisions for timely payment for ship-

ments he authorizes, due accounting for amounts due less

commissions, and quotation of the price announced by

Agrashell for intended sales of a product to be shipped

directly to buyers from Agrashell’s own plant or warehouse

facility.

That such a contract is entirely lawful, both at common

law and under the Sherman Act, was held by this Court

in United States v. General Electric Co., 272 U.S. 476

(1926):

The owner of an article, patented or otherwise, is not

violating the common law, or the Anti-Trust law, by

seeking to dispose of his article directly to the con-

sumer and fixing the price by which his agents trans-

fer the title from him directly to such consumer. 272

US. at 488.

This rule was confirmed in Simpson v. Union Oil Co.,

377 U.S. 13 (1964), where the entire Court declined to

overrule General Electric although the extensive system

of coercive “consignment” contracts involved in Simpson

was found to be an illegal price-fixing combination. This

Court there stated that:

. .. an owner of an article may send it to a dealer who

may in turn undertake to sell it only at a price deter-

mined by the owner. There is nothing illegal about

that arrangement. 377 US. at 21.

In this case, the court below cited Simpson for com-

parison with its ruling on the Wheelabrator contract. But

LALLA RL EE aE Re Reems neencenensramscacen meme

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- 19

Simpson clearly is inapposite so far as it found an anti-

trust violation. The violation found there arose from the

facts that (1) Union Oil used a “consignment” scheme “‘to

cover a vast gasoline distribution system, fixing prices

through many retail outlets” [there were 1,978 gas station-

lessee “agents”, i.e., 99% of the lessees, and 1,327 or 63%

of the non-lessee “agents”, under the contracts] and (2)

the prices set by Union were imposed and maintained by

coercion, as was vividly demonstrated by Simpson’s suit

which came about because his lease was terminated, driving

him out of business, for his having failed to conform to

the prices imposed by Union Oil.

There is no parallel in this case to the basis of the

decision in Simpson: Agrashell made no consignment of its

product. The Wheelabrator contract governed dealings

with only one distributor, and was its only contract re-

quiring orders to be taken at Agrashell’s prices. There

was no coercion; in fact, the simple agency contract in-

volved here was drafted by Wheelabrator, not Agrashell.

There was no “price fixing” in the sense of Simpson, where

the thousands of “consignment” contracts were holdable

only by adherence to the gasoline price set by Union Oil

and amounted in effect to a market-wide imposition of the

manufacturer’s price on thousands of potentially competing

traders at the same level of distribution.

The result of the ruling of the Court of Appeals is to

place every supplier of a product that may be patented,

who has an agency agreement for the sale of his product

at his price, in jeopardy of a treble damage suit the day

after the patent, if any, expires,

= Ay vr URE BERK ae a PO RC OO ee es a eT Oe COTE ae >

eye aay “ 6 va bas inne hy ns ys SESS ae ee Oy % .

B. The ruling has created a new but inexplicable

doctrine, and has let it turn a lawful contract

into illegal conduct ex post facto, by holding

that a mere sales agency agreement could have

‘“‘extended the life of the patent’? and thus con-

stituted a Sherman Act violation upon contin-

uing in effect beyond the expiration of a patent

for the product concerned.

The Court of Appeals recognized that under the Gen-

eral Electric rule, 272 U.S. at 448, the Wheelabrator con-

tract, considered as a contract of agency, was not in vio-

lation of the antitrust law when it was made in 1950, or

during the 14 years up to June 10, 1964 when the Perry

patent expired [Opinion, pp. 17-18].

Nonetheless, without mention of any authority or any

reason for so ruling, the Court said “we think that whatever

protection General Electric afforded the Wheelabrator con-

tract ended when the patent expired” and, since the con-

tract continued afterward, “the jury could have correctly

concluded that the Wheelabrator contract extended the life

of the patent . . . and constituted a contract in restraint of

trade.”

This ruling is in clear conflict with the ruling in

General Electric that the owner of an article, patented or

otherwise, is “not violating . . . the Anti-Trust law . . . by

. .. fixing the price at which his agents transfer the title

from him.” It similarly contradicts a like statement in

Simpson, 377 U.S. at 21, where unpatented products were

involved.

It is apparent that the Court’s rationale has turned the

lawful Wheelabrator contract into illegal conduct ex post

facto. A mere sales agency agreement clearly lawful when

made in 1950 is held to have become illegal solely because

- 21

of having continued in effect after the expiration in 1964 of

a patent that claimed the product being distributed under

the contract. It has been so condemned, after the fact,

although no unlawful act was committed either by the

making of the contract or by ensuing years of the selling

relationship under it. Remarkably, the sole event held to

cause illegality, after 14 years of a lawful business rela-

tionship, was that a patent expired by operation of: the

patent law.

Manifestly, a vast reordering of common commericial

affairs will be mandated by such a doctrine. The mere

possession of a patent right, whether being enforced or

not, would become a Sword of Damocles over any pro-

ducer who had contracted with an agent to further the

original sale at his price of products made under the

patent.

While the expiration of the Perry patent ended any

influence the patent might have had on Wheelabrator’s

reasons for contracting to become a commission agent for

Agrashell’s SGA, it did not alter or affect the contract in

any respect. As far as the contract was concerned, Wheel-

abrator was free at all times to deal in anyone’s SGA at

any price. Most importantly, since Wheelabrator was free

to end the contract by mere notice at the end of any year

after 1950, the expiration of the patent in 1964 could

only have enhanced Wheelabrator’s freedom to choose the

product or products it wanted to promote from among the

soft grit abrasive products of Agrashell’s competitors

[there were at least twelve companies then engaged in the

manufacture of soft grit abrasive].

Both before and after the expiration of the patent, the

Wheelabrator contract continued only because of a year to

year election by Wheelabrator to continue serving as a

selling agent for Agrashell; after the patent expired Wheel-

abrator and the customers it served were totally free

to deal in, buy and use the SGA of any of twelve or more

different suppliers, at any price they would quote.

- It defies all reason to rule that a contract which was

lawful during the period when a patent might have in-

fluenced the continuance of it became a violation of Section

1 upon the expiration of the patent, at which time there

was not even the extraneous influence of the patent to

induce continuance of the contract or to inhibit Wheel-

abrator from selling whatever SGA it wished, obtained at

whatever price from whatever of the many available

sources it might elect to use.

CONCLUSION

This petition for a writ of certiorari should be granted

as to both of the questions presented.

Respectfully submitted,

ALBERT C. JOHNSTON

230 Park Avenue

New York, New York 10017

Douc.as STRIPP

1006 Grand Avenue

Kansas City, Missouri 64106

Attorneys for Petitioner

Of Counsel:

3 PauL R. LAMOREE

“4 1006 Grand Avenue

Kansas City, Missouri 64106

Guy W. SHoup

230 Park Avenue

New York, New York 10017

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FOR THE EIGHTH OIROUIT

No. 71-1538

AGRASHELL, INC.,

Appellant, Appeal from United

States :

vs. > District Court for

the Western {

HAMMONS PRODUCTS COMPANY, District of Missouri

Appellee.

Submitted: June 15, 1972

Filed: March 30, 1973

Before ROSS and STEPHENSON, Circuit Judges, and URBOM,

Chief District Judge,

ROSS, Circuit Judge.

Agrashell, Inc. (Agrashell) appeais from a judgment entered

on a jury verdict in favor of Hammons Products Company

(Hammons), on a counterclaim filed by Hammons in a patent

infringement suit alleging violations of sections | and 2 of the

Sherman Act and requesting treble damages under the Clayton

Act. For reasons hereinafter set forth, we reverse in part and

affirm in part the judgment of the trial court and order the

dismissal of that portion of the counterclaim alleging violations

of section 2 of the Sherman Act.

Procedural History

Agrashell instituted a patent infringement action against

Hammons in 1963. The trial court granted Hammons a

summary judgment because it found that Agrashell, as an

exclusive licensee, did not have a right to sue for patent

infringement in its own name without participation of the

patent owner as party-plaintiff. Agrashell, Inc. v. Hammons

Products Co., 248 F. Supp. 258, 260 (W.D. Mo. 1965), aff'd,

352 F.2d 443 (8th Cir. 1965).

Although the patent expired in 1964, Agrashell obtained an

assignment of title to the patent and refiled the action in 1965

for past infringement. These proceedings were stayed pending

the outcome of the appeal from the 1963 summary judgment.

Thereafter, Hammons filed an answer and counterclaim

charging violations of sections | and 2 of the Sherman Act (15

U.S.C. §§ 1-2) and for a declaratory judgment of patent

invalidity, unenforceability and noninfringement. The case was

then set for trial.

A motion. made by Agrashell at the outset of the 1967

infringement trial, to sever the antitrust counterclaim issue from

the patent issue was granted at the conclusion of the patent

infringement portion of the case. On the patent claim, the trial

court entered judgment for Hammons, finding the patent

invalid and not infringed either directly or contributorily. The

court also found that even if the method claim were valid, it

was not infringed by Hammons. Agrashell, Inc. v. Hammons

Products Co., 279 F. Supp. 522 (W.D. Mo. 1967), aff'd, 413

PAIN ABINAANG REL SER LEE SPONTA TOS AIA IT

F.2d 89 (8th Cir. 1969). The court, however, denied Hammons’

request for attorneys’ fees pursuant to 35 U.S.C. § 285.

Immediately following the trial of the patent issue, both

parties conducted discovery relating to Hammons’ antitrust

counterclaim, and Hammons requested a jury trial. Agrashell

then requested leave of the court to file an amended reply and

counter-counterclaims: for breach of contract and antitrust

violations. Agrashell alleged that Hammons had violated

sections | and 2 of the Sherman Act, section 7 of the Clayton

Act (15 U.S.C. § 18), and the Robinson-Patman Act (15 U.S.C.

§ 13). Both requests were granted and the case proceeded to

trial in 1970.

At the outset of the 1970 trial, Hammons moved for trial of

its counterclaim separate from trial of Agrashell’s

counter-counterclaim. The trial court decided that each case

would be presented separately but to the same jury. However,

five weeks later, at the close of all of the evidence on Hammons’

counterclaim, the motion for severance was granted over

Agrashell’s objection, Agrashell’s motions for a directed verdict

were denied,! and a verdict was returned by the jury in favor of

Hammons. Thereafter, pursuant to a stipulation of the parties,

Agrashell’s counter-counterclaims were dismissed without

prejudice. Agrashell’s motions for judgment n.o.v. or for a new

trial were denied, and this appeal was taken.

Statement of Facts

A. The Product

This case involves the use of processed nutshells in two ways:

First, as a soft grit abrasive (SGA) in cleaning operations, and

‘. At the same time, however, the trial court noted that it refused to

submit to the jury the issue of fraud in the procurement of the patent. See

Walker Process Equipment, Inc. v. Food Machinery & Chemical

U.S. 17241965) ‘ ical Corp.. 382

secondly; as.lost circulation material (LCM) used in oil well

drilling. Wig

SGA is “soft” in relation to harder abrasives such as sand.

For example, SGA is projected against deposits on engine parts

by air blasting and other means so as to remove the deposits

with a minimum of damage to the part itself. While SGA may

be composed of nutshells, it may also be composed of fruit pits.

sawdust, rice hulls, corn cobs and clover seeds. The type of

nutshells used may also be differentiated as either soft or hard.

Agrashell sells SGA which is composed of black walnut and

apricot pit shell, and Hammons sells SGA which is composed

solely of black walnut shell.

Various companies processed or “‘manufactured” SGA in

some form during the time periods in question. Agrashell of Los

Angeles, California; Hammons of Stockton, Missouri; Gravette

Shelling Company of Gravette, Arkansas? (Gravette); Block

Brothers, Inc. of Nashville, Tennessee; and Block Walnut

Processing Corp., of Nashville, Tennessee (known together as

Block); Continental Nut Company of Chico, California

(Continental); Industrial Flour and Abrasives Company of

Morristown, Tennessee (Industrial Flour); Lufkin Pecan

Company of Lufkin. Texas (Lufkin): Star of Texas Company of

Fort Worth. Texas (Star of Texas); Texas Feed and Grain

Company of Fort Worth, Texas (Texas Feed); and Southeastern

Reduction Company of Valdosta, Georgia (Southeastern) are,

or were during the periods of time in question, processors of

SGA. Various companies distributed SGA, but apparently did

not manufacture it: Pangborn Corporation of Hagerstown,

Maryland (Pangborn); American Wheelabrator & Equipment

Corporation of Mishawaka, Indiana (Wheelabrator) [both

Pangborn and Wheelabrator were large manufacturers of blast

cleaning equipment]; Composition Materials Company

2. Hammons acquired the controlling interest in Gravette in August of

1966

LY PS PO et 26667 LE ANE AA il aL AN NOTIN SGI

(Composition) [Block’s jobber] ; Bernard Sirotta Company of

New York, New York (Sirotta) {which at one time sold

Hammons’ SGA], and several others distributed Agrashell’s

SGA.

The Pan American Petroleum Corporation developed another

use for processed nutshell and patented the idea, giving

Cherokee Laboratories an exclusive license under the patent for

part of the time relevant here. Pan American’s patent covered

the use of processed nutshells in controlling the loss of

circulation of drilling muds utilized in oil well drilling. Agrashell

sells this “lost circulation material” (LCM) which is composed

primarily of english walnut shell and thus different from its

SGA. Hammons sells LCM which is almost identical to its SGA,

except for somewhat different sizes of the particles. LCM may

also be composed of nonnutshell products ranging from cotton

seed hulls to golf balls. Other companies, including Gravette and

Block, manufacture nutshell LCM.

The geographic markets for LCM and SGA are different. SGA

is sold nationwide, with emphasis in the industrial northeast,

while LCM is concentrated in the Mid-Continent and Gulf

States oil producing regions.

B. The Patent

Frank Perry, a civilian employee at an army air depot in

California during World War II, learned that projecting ground

black walnut shells of 10/15 or 10/30 mesh size against airplane

engine parts constitued an ideal SGA. Perry applied for and was

granted a patent, basically claiming

“the method of cleaning metal by ‘projecting there against a

stream of fluid under pressure carrying in suspension therein

pelletized black walnut shells,’ and a product, ‘an abrasive

material for use in air blasts for cleaning metal comprising

BEC NILE AD OE 4

pelletized black walnut shells.” Agrashell, Inc. v. Hammons

Products Co., supra, 279 F. Supp. at 522.

It was later learned that apricot pits have very similar physical

characteristics to the black walnut shell, and they are used

interchangeably by Agrashell.3 /d. at 523.

Perry assigned the patent to Turco Products Company, Inc.,

which granted an exclusive license to Agrashell. The patent was

in turn assigned to Purex Corporation, when Turco merged with

Purex, and finally was assigned by Purex to Agrashell.

Throughout this entire period, dating from 1947, Agrashell had

an exclusive license. The patent expired on June 10, 1964.

C. The alleged Sherman Act violations

Hammons’ claim was essentially that Agrashell had attempted

to monopolize hard nutshells within the SGA markets in

violation of section 2 of the Sherman Act by means of

infringement suits and certain formal and informal contractual

relationships so as to extend the Perry patent beyond its terms

and life. Hammons also claimed that certain formal and

informal contractual relationships unreasonably restrained trade

in hard nutshells within the SGA markets in violation of section

1 of the Sherman Act because the arrangements extended the

Perry patent beyond its terms and life.

(1) The Sirotta suit

In 1958 Sirotta had begun to purchase Hammons’ SGA for

sale to Sirotta’s customers. In October of 1960 Sirotta received

3. The Perry Patent Reissue indicates that the shells to be used were those

“having the hardness of black walnut shells,” as well as, black walnut shell

alone. The patent “‘contemplates the use of pellets of other types of

ground or cracked nutshells having equivalent characteristics” of black

walnut shell. The testimony of both parties indicated that apricot pit shell

and black walnut shell have similar hardness, resilience, and resistance to

breakdown characteristics.

LA ECVE BAD CAR GOED NA te ib Twi

a notice of infringement from Agrashell; Agrashell had in 1954

written Sirotta about the possibility of infringement liability.

Sirotta contacted patent counsel who investigated the situation

and concluded that there was insufficient basis to challenge the

patent at least insofar as “prior art” was concerned. Sirotta was

selling nutshell SGA, including black walnut and apricot pit

SGA, for use in blasting equipment, including air blasting

equipment. Settlement negotiations broke down between

Agrashell and Sirotta and the infringement suit was filed in

February of 1963. ~

During the course of taking a deposition Bernard Sirotta, the

president of Sirotta, asked to speak to Ayers, the president of

Agrashell, alone. Sirotta purportedly asked Ayers whether the

suit could be settled as between two businessmen. Sirotta claims

Ayers replied as follows:

“There can be only one way to settle this matter and that is

for you to get out of the business. You have no right to be

in the walnut shell business. This is my domain. If you do

not leave the business, I will cut prices so low that you will

not be able to survive.”

Ayers contradicted this statement at trial and indicated that he

only asked Sirotta about his position in light of the Perry patent

and told Sirotta that he thought he was infringing the Perry

patent.

Hammons was impleaded by Sirotta as a third party

defendant on the basis of an indemnity agreement between

Hammons and Sirotta established when Sirotta bought

Hammons’ SGA. Hammons resisted Sirotta’s attempt to obtain

jurisdiction over it, see Agrashell, Inc. v. Bernard Sirotta Co.,

344 F.2d 583 (2d Cir. 1965), but finally entered a personal

appearance in the suit in 1966 and counterclaimed against

Agrashell for antitrust violations. The Sirotta litigation was

settled when Sirotta payed $2,500 to Agrashell in 1968.

Hammons’ counterclaim in the Sirotta action was dismissed by

stipulation without prejudice.

(2) The Hammons suit

In April of 1962 Hammons agreed to supply Agrashell with

black walnut shell of a mesh size suitable for blast cleaning.

Shortly after the consummation of that agreement, Ayers

visited with the Hammons officers. Although the evidence is

conflicting, Ayers apparently informed Hammons that he had a

patent for cleaning metal utilizing black walnut shell. He

indicated that his lawyers advised him to sue every shell grinder

who was infringing the patent but that he did not intend to sue

Hammons because Hammons had not been cutting prices. An

official of Hammons testified that Ayers

“‘made us aware of the Perry Patent, and then also that

there was some discussion on lost circulation material and

he told us that the main purpose of his visit was to get

acquainted, check our material, and to see if we couldn’t

work out a lost circulation price that would be profitable to

everybody involved.”

The official further testified:

“Mr. Ayers advised me that his attorney had advised him to

sue everyone who was in the [sic] selling soft grit abrasive

materials. However, that they didn’t plan to sue everyone

but they were going after those who were guilty of cutting

prices.

The official was asked whether Ayers made any statements

about Hammons’ LCM price and the official responded that

Ayers stated “he didn’t think that we were cutting prices and

trum the prices that they gave me at that time, we were getting

approximately the same prices, close not exactly. but close ~

OIE A ee TIRES

In June of 1962 Hammons signed an LCM contract with a

former customer of Agrashell. Shortly thereafter Ayers called

Hammons wanting to know about the contract, Ayers was told

only that there was a contract, but no specifics were given to

him. About October of 1962 Agrashell began to complain about

the SGA material supplied to Agrashell and its customers,

indicating that Agrashell had received a number of complaints

relating to objectionable dust in the Hammons product sold to

Agrashell and to its customers. In November of 1962 Agrashell

ordered Hammons to ‘stop production for Agrashell’s account

with regard to the prior contract. In December of 1962

Agrashell sent Hammons a notice of infringement of the Perry

patent.

Agrashell was willing to settle the matter based upon the

payment of royalties on “pellets of black walnut shells, or other

nutshells (including apricot pit shells) equivalent thereto for

blast cleaning purposes” sold by Hammons for or used as SGA

and requiring Hammons to accept a license. Negotiations broke

down partly because Hammons did not consider apricot pit

shell to come within the confines of the Perry patent but

primarily because Hammons finally decided it would not pay

the royalty after first evidencing an intent to settle on that

basis. Agrashell’s suit against Hammons was filed on August 7,

1963.

In its complaint filed in 1965 after acquiring title to the

patent, Agrashell alleged, among other things, that:

“Within the six (6) years last past, and within the term

said reissued letters patent. defendant has manufactured.

sold, used, and actively induced others to use within the

Western District of Missouri and elsewhere pelletized

nutshells having the hardness of black walnut shells,

including pelletized black walnut shells and such pelletized

nut shells having screen sizes of 10-30 mesh and 10-15

Bn oat

sesh, for’ th ing‘ of articles’ by use of the pelletized

projected against the articles. Defendant

* | thereby has infringed said reissued letters patent.”

’"Hlainmons “answered, asserting ‘affirmative defenses and

oui eaeelaaal ‘Hammons alleged, among other things, that

‘Agrashell b ‘had misused the patent by attempting to extend it to

materials not covered including “walnut shells and/or ground

fruit pits.” Hammons counterclaimed asserting, among other

things, that Agrashell had attempted to restrain and did restrain

trade in commerce of ground black walnut shells in violation of

the Sherman Act, 15 U.S.C.§§ 1-2. Hammons additionally

claimed that the Perry Patent Reissue had been obtained by

virtue of fraud in that Agrashell knew of a prior patent covering

the same conception patented in the Perry Patent Reissue.

A meeting between Agrashell and Hammons was arranged on

March 24, 1966, by an official of Gravette who apparently

wanted to clarify the situation between Gravette and Agrashell.

The relationship between Gravette and Agrashell was awkward

because while Gravette and Agrashell had engaged in certain

contractual relationships, Hammons, who was being sued by

Agrashell, was in the process of acquiring the majority of

Gravette’s stock. During this meeting, an official of Agrashell,

apparently in response to a question from an official of

Hammons about Agrashell’s position in the lawsuit, indicated

that if Hammons was interested in concentrating on the walnut

meats alone, Agrashell would be interested in handling

Hammons shell product or acquiring their shell grinding

facilities.

No agreement being reached and neither party having

requested a jury, trial was commenced before the district court

on March 20, 1967. On that day one of Agrashell’s counsel

moved to sever the antitrust counterclaim. The motion was

taken under advisement. The district court held that the patent

was invalid due to obviousness and therefore not infringed, but

RAE Se

that even if the method claim was valid it was not’ infrings

either directly or indirectly.4 Agrashell, Inc. v. Hammoi

Products Co., supra, 279 F. Supp. at 522-524. Prior to its

judgment on the patent case, but after all evidence had been

taken with regard to the infringement side of the suit, the

district court ordered a continuance with regard to the antitrust

counterclaim. The district court also declined to award

attorneys’ fees to Hammons.) See 35 U.S.C. § 285.

(3) Contracts

Two types of contractual-like arrangements are involved in

this case. The first is known as a “Statement of Policy” which

Agrashell sent to some of its sales agents. The policy had three

essential parts which are especially relevant: Agrashell reserved

the right to set selling prices to the ultimate consumer invoiced

by the agent; the selling agent agreed to buy, sell and

merchandise only Agrashell SGA as long as the agent distributed

Agrashell SGA; and Agrashell averred that it was the exclusive

licensee under the Perry patent and had the exclusive right to

convey the right to use SGA materials.

The Statement of Policy was first formulated some time in

the late 1940’s. Agrashell contended at trial that the agents who

4. In the judgment the district court did not explicitly state whether the

product claims would have been infringed by the Hammons product if the

patent was valid. But in the trial of the antitrust counterclaim the same

district judge referred to the Hammons product as an “admittedly

infringing product.”

5. During the trial of the antitrust counterclaim the trial judge explained

why he did not award attorneys’ fees to Hammons in the patent case:

“I had read the few cases that are in the books under it [35 U.S.C. §

285] and to me, the determining factor was a question of good faith

and I- —whether I had the proper interpretation of good faith or not,

I came to the conclusion there was no question that the plaintiffs

[Agrashell] thought they had a valid patent, they were trying to

uphold what they thought was a valid patent, and they brought the

suit in good faith in that sense * * * .”

SGI LL

aes

1 its SGA were never bound by the provisions of the policy,

two of Agrashell’s agents testified that they were neither

esate with the Statement of Policy nor operated under it.

However, there is Agrashell correspondence which tends to

support the inference that the Statement of Policy was agreed

to by some of the agents.

While there was Agrashell correspondence which indicated

the possibility of sale of SGA to agents for resale, there was

direct evidence from two of Agrashell’s agents who testified

that they never took title to the goods, never insured against

loss, never paid storage costs, never paid taxes on the goods, and

were merely paid a commission for the sales they made of

Agrashell’s products.

The second type of contractual arrangement involved the

negotiation of more formal contracts with Wheelabrator and

Pangborn. The contract with Wheelabrator was negotiated in

1950, and it appointed Wheelabrator, a large manufacturer of

blasting equipment, Agrashell’s del credere factor for the sale of

SGA. The contract also established that Wheelabrator was to

receive a commission on the sale of Agrashell’s SGA, that

Wheelabrator did not need to maintain an inventory of SGA.

that Agrashell would ship directly to the buyer. and that

Agrashell would be able to set the selling price. if, for certain

enumerated reasons, Agrashell could not fill Wheelabrator’s

orders. Wheelabrator. after notification to Agrashell, was free

temporarily to obtain similar materials for its requirements.

This contract could be terminated by giving notice 60 days

prior to any anniversary date thereof.

The contract with Pangborn, another large blast cleaning

equipment manufacturer, was negotiated in settlement of an

infringement suit brought by Agrashell against Pangborn.

Pangborn had been selling black walnut SGA obtained from

Gravette —

BE LETRA MRA NMEA OL Le PBN es tee UY

SDR RB NL ASO OM STEARATE,

The Pangborn agreement bound Pangborn to handle only

Agrashell SGA until the patent expired, and after that time, for

a period of some three years, Pangborn agreed to buy ‘from

Agrashell all of the SGA it needed unless a competitor could

quote a lower price on similar quality goods, in which case

Pangborn remained bound to buy from Agrashell unless

Agrashell elected not to meet the lower price. The Pangborn

agreement did not allow Agrashell to set prices. An

administrative assistant to the president of Pangborn testified

that at no time under the contract did Pangborn own the

Agrashell product or pay taxes or freight costs thereon.

(4) Related activity

On June 13, 1962, Ayers visited Jimmy Cox, president of the

Block companies. Block had been active in the LCM and black

walnut shell SGA markets. The substance of the conversation

between Ayers and Cox purportedly involved Ayers’

dissatisfaction with the price structure in the LCM market in

particular and the shell business in general. Ayers noted that he

had a price stabilization plan for the LCM market, but Cox

would not agree to any price stabilization plan. Ayers indicated

that if Block would not agree, Agrashell would enforce its

patent. About a month later Block received a notice of

infringement from Agrashell.

Suit based, in part. on the Perry patent was filed against

Block in March of 1963. The suit was finally settled for $2,500,

with Block paying half and Composition Materials, its jobber,

paying half. Ayers contradicted Cox’s testimony concerning this

incident at the trial and contended that the only purpose for his

visit to Block was to speak about Block’s infringement of the

Perry patent with regard to SGA and to speak about a joint

promotional program for the sale of LCM.

After Agrashell’s settlement with Pangborn. an official of

Gravette approached Agrashell with the Proposition that

BM RASS,

Gravette . ‘might>become licensed under the Perry patent.

/Gravette:had concluded that if Pangborn was satisfied that the

Petry patent was valid it too would recognize the patent. During

‘@ Meeting between the president of Agrashell and officials of

Gravette, Ayers allegedly stated that there was “one of two

-ways this can be handled. either by lawsuit or by negotiating a

contract.” A contract was negotiated by Agrashell and Gravette

with Gravette agreeing to supply black walnut shell processed

and suitable for use as LCM, although 10 percent of the

material might be shell suitable for SGA use. The contract,

which was negotiated prior to the expiration of the patent,

extended some three years after the expiration of the patent.

D. The Verdict and Damages

The district court sent the counterclaim to the jury after five

weeks of trial, but he refused to submit the issue of whether the

patent had been fraudulently procured because he felt that no

submissible case of patent fraud had been established. The jury

returned a verdict in favor of Hammons and assessed damages in

the sum of $204,124.21. That sum was comprised of

$162,374.21 for litigation expenses and, $41,750.00 for loss of

profits. The jury assessed no damages for injury to going

concern value. The gross amount of damages was trebled by the

district court and that sum equaled $612.372.63. The district

court awarded attorneys’ fees of $150,000.00 and costs of

$13,361.31. The total judgment was $775,733.76.

The litigation expense damage was predicated upon

Hammons’ proof of the amount it had spent to defend the

patent infringement suit brought against Sirotta, $20,455.20,

and the amount it had spent to defend the infringement suit

Agrashell brought against Hammons itself, $141,919.01.

The jury award of $41.750.00 in damages was apparently

based upon evidence adduced by Dr. KuhIman. an economist.

His testimony concerning the damages sustained by Hammons

was the only theory of damages Hammons presented and is

summarized later in this opinion. Sakis pea”

Issues Presented on Appeal

In its appeal from the judgment of the trial court, Agrashell

raises these issues:

1. Whether Hammons failed to establish that Agrashell had

violated the Sherman Act and by so doing proximately

injured Hammons.

2. Whether Hammons’ claims were barred by principals of res

judicata, collateral estoppel, or compulsory counterclaim.

3.Whether certain instructions relating to “dangerous

probability,’’ prosecution of the suit for patent

infringement, “target area,”, and agency arrangements,

were prejudicially erroneous.

4. Whether prejudicial error occurred in the conduct of trial

relating to the issues of waiver of jury trial, admission of

deposition testimony, and exclusion of offers of

compromise.

Sufficiency of Proof of Sherman Act

Violations and Damages

Hammons alleged violations of both section 1 and section 2

of the Sherman Act. After a careful review of all of the

pleadings, testimony and exhibits. we are convinced that

Hammons did make a submissible case under section | of the

Sherman Act but did not make a submissible case under section

2 of the Act; and that the trial court should have granted the

motion for a directed verdict made at the close of all of the

evidence as to section 2. That motion stated, in part, that

US Man RAV NEA DA EMM AL) BQH

— 16—

a Dak ?

‘Hammons has not established by sufficient competent

evidence a violation of ... section 2 of the Sherman Act by

Agrashell.”

Sons

A. Section 1

Section 1 of the Sherman Act proscribes contracts in

restraint of trade or commerce. Hammons claims that the

written contracts with Pangborn and Wheelabrator and the

“Statement of Policy’® used with Agrashell’s sales agents as

heretofore described, and the alleged illegal use of the patent in

those contracts, constituted restraint of trade, and that as a

result of those alleged contracts in restraint of trade, it was

damaged by loss of business. Agrashell claimed that the contract

with Wheelabrator did not require Wheelabrator to deal

exclusively in Agrashell’s SGA; that the requirement to that

effect in the contract with Pangborn terminated upon the

expiration of the patent; that the “‘Statement of Policy” was

not a contract but-a unilateral declaration by Agrashell which

could not be and was not enforced; that in any event Pangborn,

Wheelabrator and the other sales representatives were not

purchasing for resale but merely selling as agents for the

account of Agrashell with Agrashell retaining title to the goods

until delivery to a buyer and therefore under United States v.

General Electric Co., 272 U.S. 476 (1926), such sales agency

agreements with price fixing provisions were legal, especially in

view of the patent and the presumption of validity that

attached thereto prior to its expiration; and that before

recovery can be had under section | of the Sherman Act,

Hammons must prove damages with a reasonable degree of

certainty resulting from the alleged illegal contracts. While there

is much merit in several of these allegations by Agrashell, we

cannot say that the evidence was insufficient for the jury to

6. Although the trial judge commented that the “Statement of Policy”

pertained to the intent issue under section 2. Hammons’ proof also

presented the “Statement of Policy” in terms of section |

6 RTE ROC STIR TR BIE BA BES

= PvP Rahs PRR

find that the Pangborn and Wheelabrator were

violative of section | of the Sherman Act......_.... sit ey)

First, we conclude that Hammons. failed to prove that the

Statement of Policy established either formal. or informal

contractual relationships with Agrashell and its agents in the

market place. Hammons called no agents to testify as to their

relationships with Agrashell, but relied solely on Agrashell’s

correspondence which indicates that the Statement of Policy

was sent to a number of agents. In contrast, there was only one

letter which tends to prove that Agrashell would not deal with

an agent unless he agreed to the Statement of Policy. Moreover,

some of the correspondence clearly indicates that Agrashell

dealt with the agents whether or not they agreed to the

Statement of Policy.

More significant, in terms of the practical application of the

Statement of Policy in the market place, is the testimony of

two Agrashell agents allegedly subject to the Statement of

Policy. William T. Hall, chairman of the board of the C. P. Hall

companies, together one of the largest if not the largest

Agrashell agent, testified that he had never seen nor heard of

the Statement of Policy. He further testified that he did not

consider himself bound to deal only with Agrashell. and that he

did deal in other types of SGA such as corn cob SGA and glass

SGA. John C. Lorenzen, a partner in the Russ-Cattell company,

likewise testified that he had never seen the Statement of

Policy. Furthermore, Lorenzen testified that he handled other

types of SGA.

Second, Agrashell strenuously argues that the Wheelabrator

contract with its price fixing Provision was legal when viewed in

light of the doctrine promulgated in United States v. General

Electric Co., supra, 272 U.S. at 488. General Electric stands for

the proposition that a patent holder does not violate the

antitrust laws by seeking to dispose of his products directly to

°T the conégumer and fixing the price by which his agents transfer

_ the title from him directly to the consumer. On the other hand,

General Electric does not allow the patent holder to sell his

> prodact-to:a person:and'then control the resale price. Assuming

\. thatthe Wheelabrator contract was a contract of agency, see

«RESTATEMENT (SECOND) OF AGENCY § 14J (1958), we

‘think that whatever protection General Electric afforded the

‘Wheelabrator contract ended when the patent expired. See

generaily R. NORDHAUS and E. JUROW,

PATENT-ANTITRUST LAW at 147-166 (Nordhaus Ed. 1972).

Cf. Simpson v. Union Oil Co., 377 U.S. 13, 21-24 (1964). Since

it was clear that the Wheelabrator contract was in effect

continuously from 1950, we think the jury could have correctly

concluded that the Wheelabrator contract extended the life of

the patent beyond the expiration date and constituted a

contract in restraint of trade.

Third, the Pangborn contract, negotiated prior to the

expiration of the patent, extended the power of the patent

beyond the life of the patent. The contract provided:

“If, after June 10, 1964. PANGBORN furnishes written

evidence of its ability to purchase blast cleaning aggregates

made from nut shells of equal quality and-at lower prices

than AGRASHELL’S selling prices to PANGBORN.

AGRASHELL shall have the privilege of either meeting such

prices as quoted from a bona fide supplier or permitting

PANGBORN to purchase its requirements elsewhere after

first tendering the order to AGRASHELL in writing.”

Since the Pangborn contract was negotiated prior to the

expiration of the patent, but extended past the expiration of

the patent:

“[Alny attempted reservation or continuation in the

patentee or those claiming under him of the patent

monopoly after the patent expires. whatever the legal!

RNASE LIAS ROU LU gs 2 pea IRS

ORNATE SL ELA OB Rel , "5, Rbdsia,

— 19 —

device employed, runs’ counter to the'policy snd purposes

of the patent laws: .:.” Scott Paper’ Co. ¥; Marcalus

Manufacturing Co., 326 U:S. 249; 256 (1945): “‘Aecord,

Brulotte v. Thys Co., 379. US. 29, be (1964). ©

Fe bo od

The Supreme Court, when faced with a somewhat similar

provision, has noted the antitrust implications:

) “The appellant had at all times a priority on the business at

equal prices. A competitor would have to ‘undercut

appellant’s price to have any hope of capturing the market,

while appellant could hold that market by merely meeting

competition. We do not think this concession relieves the

contract of being a restraint of trade, albeit a less harsh one

than would result in the absence of such a provision. ...”

International Sait Co., Inc. v. United States, 332 U.S. 392,

397 (1947).

As a consequence, we conclude that the jury was entitled to

find that the Pangborn contract extended the life of the patent

unlawfully and constituted a contract in restraint of trade.

Turning now to Agrashell’s argument that Hammons failed to

prove the fact of damage resulting from the use of the contracts

and Statement of Policy. it should first be noted that its expert

testimony concerning its damages and the computation thereof,

does not include any reference to any loss of business which it

once had, but only business which Agrashell had during the

entire period in question and which Hammons felt that it

f should have had. In this respect this case is analogous to the

case of Herman Schwabe, Inc. v. United Shoe Machinery Corp..,

297 F.2d 906, 910 (2d Cir.), cert. denied, 369 U.S. 865 (1962).

in which Judge Friendly noted as follows:

“Plaintiffs theory here was not that acts by defendant

had untlawtully deprived it of something it previously

Possessed tt ould not well have been so since there was

sat -pothing to indicate that defendant's conduct had. changed

satis i the worse during the damage period or, indeed, since

plaintiff was organized, and plaintiff's original investment of

$10,000 had produced an earned surplus of over $300,000

by 1961, after substantial salary payments to Mr. Schwabe,

its. sole stockholder. and dividends. Plaintiff's evidence.

therefore, was necessarily directed to attempting to show

how defendant had unlawfully deprived it of business it

. Might otherwise have secured. It was entirely competent for

plaintiff to seek to show this ....”

Indeed, the evidence showed that both Agrashell and Hammons

prospered during the period in question and made overall gains

in the sale of their nutshell products.

Hammons’ evidence of damages was adduced from the expert

testimony of Dr. Kuhlman during which the charts summarizing

the damages were submitted. Briefly stated, Dr. Kuhiman first

gave his opinion that Agrashell had erected barriers around a

portion of the hard nutshell SGA market. These barriers were

the patent, the patent litigation, price fixing, and exclusive

dealing arrangements. He then looked for a portion of the

market where those barriers were not present or at least not a

factor and chose the Columbus, Ohio SGA market. The sole

customer in this market was Western Electric. Both *.zrashell

and Hammons sold to Western Electric, Hammons selling direct

and Agrashell selling first by agents and later direct. Having thus

found what he considered to be a market without barriers, he

determined ‘that over a period of years Hammons had 60

percent and Agrashell had 40 percent of the SGA business in

that market. He then concluded that therefore Hammons

should have 60 percent of all of Agrashell’s SGA business which

it conducted through its principal agents. He figured Hammons’

damages by taking the average price at which Agrashell sold in

the Columbus market, multiplied by 60 percent of Agrashell’s

volume with its dealers and deducted therefrom the amount for

which Hammons sold the same volume of material as LCM. His

i ase

PE sae OP OS SERN IatR

damages

were $26 per ton of 60 percent of the tons which Agrashell sold

through its dealers, or a total of $160,924.55. This approach,

although unique, has many practical defects.

The first defect is in the use of the Columbus market as a fair

example of what might have happened nationwide in the

absence of the barriers. In the first place, there was only one

customer in the market, and it bought in substantial quantities

as distinguished from most of Agrashell’s customers who bought

in smaller quantities from stocks shipped into warehouses for

distribution by agents. Secondly, there is no evidence as to

whether or not that customer bought only from Agrashell and

Hammons or also from other suppliers. More importantly, the

evidence is clear that Agrashell sought to sell to Western

Electric, SGA composed of both black walnut shells and apricot

pits while Hammons offered a product composed of only black

walnut shells. The evidence also establishes that Western

Electric was a sophisticated buyer and may not have always

used the two products interchangeably.”

Dr. Kuhlman acknowledged that in making his estimate of

damages he had not considered the impact of sales of SGA by

companies other than Agrashell and Hammons. Even assuming

that the alleged barriers kept Hammons from its fair share of

the market, it is difficult to understand how anyone could

reliably determine what share Hammons should have had

without knowledge of the market shares other competitors

might have captured.

7. Evidence that Western Electric did not consider the products

interchangeable is the fact that during the three years that Agrashell made

no sales in the Columbus market (1963-1965). Hammons’ sales did not

increase as a result

a ae

In addition, Dr. Kuhlman did not explain why Agrashell’s

alleged anticompetitive conduct. which was supposedly so

effective in other places, was not effective in the Columbus

market. Apparently one reason for selecting the Columbus

market was the fact that both Agrashell and Hammons had been

in some sort of competitive relationship for a number of years.

The failure to explain why the Columbus market was isolated

from Agrashell’s conduct is highly suspect considering some of

the evidence adduced at the trial. For instance, in 1962 when

Agrashell did use an agent in the Columbus market and when

the patent was still viable Hammons sold 111 tons of SGA and

Agrashell 47. In 1963 when Agrashell wrote to Western Electric

using the words “patent protected soft grit abrasive,” a

technique which Kuhlman specifically labeled as a “barrier,”

Hammons sold 98 tons of SGA and Agrashell sold none. Still

further in 1967 and 1968, long after the patent expired and

long after Agrashell had ceased doing business with an agent in

the Columbus market, Hammons’ sales fell dramatically with

Hammons selling 29 tons in 1967 to Agrashell’s 114.325 tons,

and 54 tons in 1968 to Agrashell’s 127.25 tons.

In applying the percentages derived from the Columbus

market, to the national market serviced by Agrashell’s agents,

Hammons’ expert witness seemingly ignored critical differences

between the two markets. In the Columbus market shipments

were made direct in large quantities, thereby allowing Hammons

to compete without agents or warehouse facilities. Most of

Agrashell’s ultimate customers, serviced by its agents, bought in

smaller quantities after Agrashell had established regional

warehousing permitting prompt delivery of various sizes and

types of its products. Hammons sold direct, or to jobbers for

resale from warehouses owned by the jobbers, or by

manufacturers’ representatives with orders shipped direct from

Hammons’ plant. Hammons did not maintain regional

warehouse facilities in order to service these smaller orders.

5 ESE ARENT A RIES LARTER Sa: semen

The evidence indicates that Hammons’ representatives visited

Pangborn in 1958 and 1962-—~—both visits apparently coming

before Pangborn was an Agrashell agent. There was also

correspondence with Pangborn in 1961—~before Pangborn was

an Agrashell agent. Hammons made no attempt to solicit the

business of C. P. Hall of Ohio. Apparently the only attempt to

acquire the business of C. P. Hall of Illinois was the sending of a

sample to Hall after Hall called Hammons after receiving a form

letter solicitation. No f urther attempt was made to contact C. t

Hall of Illinois. It is noted that the C. P. Hall companies

combined composed well over one-third of the business

Hammons claimed to have lost. Solicitation of the Wheelabrator

business involved sending two letters in response to a form

letter from Wheelabrator trying to sell a machine to Hammons.

The evidence indicates that Wheelabrator actually bought SGA

from Hammons; some four to five 50 pound bags. This evidence

tends to indicate two things. First, Hammons’ sales efforts were

rather ill-suited to acquiring the business of Agrashell agents.

Second, when Hammons did try to solicit the business of the

agents, at least C. P. Hall and Wheelabrator either bought or

expressed an interest in the Hammons’ product, and apparently

did not consider themselves bound to deal only with Agrashell.

This conclusion is strengthened by the testimony of Hammons’

own vice president that he could not recall ever being told by an

Agrashell agent that 1 could not deal in a Hammons’ product

because of the Perry patent or the Statement of Policy

More importantly, there was no evidence tending to show

why Hammons could not sell direct or through agents to the

ultimate consumers who were purchasing from Agrashell

through Agrashell’s agents. It is clear that the so-called barriers

did not stop Hammons from selling a similar product to Western

Electric, or to the automobile manufacturers in the Detroit area

where it had 100 percent of the SGA market It is also clear

that Agrashell’s ultumate consumers were paving higher prices

than Hammons was receiving in its sales to Western Flectric

which should have made it easier tor Hammon k- wompete for

: rx

this’ business.® One conclusion that could be reached is that the

“only” thing” ‘that kept Hammons from selling to the ultimate

on “serviced ‘by “Agrashell’s agents from Agrashell’s

uses is either the failure of Hammons to actively solicit

‘the ‘ business or its failure to maintain regional warehouse

facilities to permit prompt delivery of small quantities of a

variety of sizes of SGA. The evidence discloses very little active

solicitation of Agrashell’s ultimate consumers by Hammons, and

the premise of Dr. Kuhlman that Hammons would have

obtained 60 percent of their business except for the alleged

barriers is highly questionable in light of these facts.

We also note that Dr. Kuhiman based his damage estimate on

the implicit assumption that the patent and the patent litigation

constituted illegal barriers in addition to the exclusive dealing

and price fixing provision of the contracts. The assumption that

the patent was an illegal barrier prior to its expiration was

conclusively negated when the trial judge ruled that the patent

had not been fraudulently procured. Likewise the assumption

that the patent litigation constituted a unilateral attempt to

monopolize and thus an illegal barrier is negated by our finding

later in this opinion that Hammons failed to make a submissible

vase of an attempt to monopolize. Thus two of the four

structural supports of Kuhiman’s damage theory were highly

questionable.

We have described some of the serious failings of Dr.

Kuhlman’s damage testimony to indicate our hesitancy to allow

a jury to assess damages upon such a theory:

8. When Dr. Kuhiman was asked why Hammons failed to attempt to sell

to Agrashell’s ultimate consumers, he was unable to explain other than by

vaguely referring to restrictions wherever Agrashell sold through an agent.

To the contrary. Dr Poe. Agrashell’s expert could find nothing in the

agreements oo Statement of Policy which would impose a harrier to the

ultrmate consumer In tact. | Agrashell help up its price it should be

expected that another seller could come in and sell at a lowe: price

STEN TORS. PIKE . oem me

“[P] roof of an isolated violation of substantive law will not

entitle defendants to an affirmative recovery. Before a party

is entitled to recover treble damages he must be able to

plead and prove actual monetary injury to his business or

property resulting from the illegal act. ... It has long been

the law that damages which are purely speculative, remote,

or based upon conjecture cannot serve as a base for antitrust

recovery. ...” American Infra-Red Radiant Co., Inc. y.

Lambert Industries, Jnc.. 360 F.2d 977, 995-996 (8th Cir.

1966).

Our critique of this damage formulation must be tempered,

however, by the Supreme Court’s statements relating to the

proper function of an appellate court when reviewing damage

evidence. As the Supreme Court has forcefully stated:

“{An antitrust plaintiffs] burden of proving the fact of

damage under Section 4 of the Clayton Act is satisfied by

his proof of some damage ... inquiry beyond this

minimum point goes only to the amount and not the fact of

damage. It is enough that the illegality is shown to be a

material cause of the injury: a plaintiff need not exhaust all

possible alternative sources of injury in fulfilling his burden

of proving compensable injury under Section 4.° Zenith

Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 114

n.9 (1969).

The Supreme Court has consistently reminded critics of damage

formulations that an antitrust violator may not properly

complain about damage proof vagaries when such ambiguity

results from the illegal act itself. See e.g., Bigelow v. RKO Radio

Pictures, Inc., 327 U.S. 251, 265 (1946); Eastman Kodak Co. v.

Southern Photo Materials Co., 273 U.S. 359. 379 (1927). With

these principles in mind we cannot say that as a matter of law.

Dr. Kuhiman’s theory failed to demonstrate the fact or

ae.

quantum: of damage’ with sufficient clarity. For these reasons

Renee amen of $41,750.00 must stand.

dt inquiry does not end with this finding however. The

award of litigation damages allegedly incurred by Hammons

when Agrashell filed certain infringement suits must stand or

fall on whether the jury could properly conclude that Agrashell

“attempted to monopolize” under section 2 of the Sherman

Act. It is clear that the act of filing the infringement suits is a

unilateral act and section 2, in contrast with section 1, is the

proper method to test unilateral activity such as that involved in

this case:

“The Congress which wrote the Sherman Act directed

its main thrust against business conduct involving two or

more parties. Section 1, proscribing every ‘contract,

combination or conspiracy’ in restraint of trade, is strictly

confined to joint action. Section 2 covers both individual

and joint action ....” Turner, The Definition of

Agreement Under the Sherman Act: Conscious Parallelism

and Refusals to Deal, 75 Harv.L.Rev. 655 (1962).

B. Section 2

Section 2 of the Sherman Act makes it unlawful to

“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 * * *.”

Hammons claimed that Agrashell attempted to monopolize the

SGA and the LCM markets although its proof relating to

attempted monopolization of the LCM market was quite

limited, and during the course of the trial and in its instructions

the district court indicated that evidence of Agrashell’s actions

as to LCM was relevant only to the issue of intent.

In addition to proving an overt act or acts, the essential

elements which must be proved in a section 2 attempt to

Nien ote

— 27 —

er seta

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; cae) ti ¥

See Swift and Co. v, United States, 196 U.S, 375, 396, 402

(1905); Kansas City Star Co. v. United States, 240 F.2d 643,

663 (8th Cir.), cert, denied, 354 U.S. 923 (1957); Hibner,

Attempts to Monopolize: A Concept in Search of Analysis, 33

A.B.A.J. 165, 1966 (1967); Smith, Attempt to Monopolize: Its

Elements and Their Definition, 27 Geo. Wash. L. Rev. 227,

229-231 (1957). . :

Although we do not rest our decision relating to section 2 on

this issue, we note that the evidence presented at trial with

regard to “specific intent” bordered on being insufficient as a

matter of law. The issue before the jury was whether Agrashell

specifically intended to monopolize hard nutshells within the

soft grit abrasive markets by seeking to extend the patent

beyond its terms or by extending the life of the patent.

At the outset, we emphasize that the trial court did not

submit the issue of fraudulent procurement of the patent to the

jury and no cross-appeal was taken on that issue. Thus the

declaration of patent invalidity did not prohibit Agrashell from

relying on the presumptive validity of the patent. It therefore

had every right to bring each of the three lawsuits against

Sirotta, Hammons, and Block if its purpose in each case was

merely to enforce its rights under the patent. The obvious and

difficult problem in this case relates to differentiating between

Agrashell’s intent to bring suits and enter into contracts under a

presumptively valid patent, thereby enforcing and utilizing a

lawful monopoly, and its alleged intent to bring suits and enter

into contracts under a presumptively valid patent for the

purpose of extending the scope of the patent beyond the grant

allowed by law. The proof of that alleged illegal intent is thin

indeed.

The evidence in this case indicates quite clearly that

Hammons sold a product that, but for the declaration of

invalidity, would have infringed Agrashell’s patent; that Sirotta

sold the Hammons product, which, as the trial judge indicated,

was an’ “admittedly infringing” one; that Gravette and Block

also sold an SGA product which was composed of black walnut

shell and that Pangborn at one time merchandised Gravette’s

product: ‘and that Sirotta’s patent counsel and Pangborn’s

patent counsel could not find sufficient grounds for challenging

the patent on the grounds the patent was subsequently declared

invalid.

Much of Hammons’ case rested on the deposition testimony

of Sirotta relative to Ayers’ statement that Sirotta “had no right

in the walnut shell business. This is my domain.” It is noted

that when this statement was made Ayers had already filed his

infringement suit and placed the infringement issue before a

court. Moreover, it was Sirotta and not Ayers who precipitated

the meeting at which the statement was allegedly made.

Understandably we are hesitant to attach much significance to

this statement.

We are also hesitant to attach any significance to the evidence

which indicates that Agrashell sued Hammons in retaliation for

Hammons underbidding Agrashell on an LCM account or to

evidence which tends to indicate that Agrashell sued Block

because Block would not agree to maintain prices in the LCM

market.

We question this evidence because, although Hammons

pleaded an attempt to monopolize the LCM market, the

relevant markets which were the subject of the attempt to

monopolize as defined by the trial judge were solely the SGA

markets. Hammons does not question this instruction. Indeed

by supplemental brief Hammons argued that it need not prove

““dangerous probability” in the LCM markets precisely because

of the judge’s limited instruction. Although Hammons contends

that the LCM intent evidence somehow relates to the issue of

intent in the SGA market, we attach little significance to

conduct related to a totally distinct product being sold in a

different geographic market. .

—2—

We turn next to an analysis of whether or not Hammons

Proved “dangerous probability” of monopolization,

“The phrase ‘attempt to monopolize’ means the

employment of methods, means and practices which would,

if successful, accomplish monopolization, and which,

approach

create a dangerous probability of it * * +.” American

Tobacco Co. v. United States, 328 U.S. 781, 785 (1946);

Central Savings and Loan Ass'n v. Federal Home Loan Bank

Board, 422 F.2d 504, 509 (8th Cir. 1970); Hiland Dairy,

Inc. v. Kroger Co., 402 F.2d 968, 971 (8th Cir. 1968), cert.

States, supra.

Thus in this case we must determine whether Hammons

presented sufficient evidence from which the jury could

properly conclude that Agrashell approached “‘so close [to

monopolization] as to create a dangerous Probability of it * *

*.”” American Tobacco Co. v. United States, Supra, 328 U.S. at

785.

In Walker Process Equipment, Inc. vy. Food Machinery &

Chemical Corp.. 382 U.S. 172 (1965), the Supreme Court held

that enforcement of a fraudulently procured patent may violate

essentially that, even though one possesses a fraudulently

procured patent or a patent which is allegedly used in a way to

enlarge its scope or life, an analysis of market factors is still

necessary. Indeed, the Court specifically stated that the trial

court had not “analyzed any economic data” when it reversed.

Id at 178. Thus it is not enough to argue that one has used a

patent in a predatory manner thereby enlarging the scope or life

of the patent: one must look to economic data tu determine the

eect

Gelenehth the peapettel deashadtinlty-cn the market which is

sd intra nethemeunanemaal, “3

4842 To siiiblieieenpaapoilnetion or attempt to monopolize

bass sca alieaien deemeiarencendied § 2 of the Sherman Act,

- cit would then be necessary to appraise the exclusionary

- power of the illegal patent claim in terms of the relevant

‘market for the product involved. Without a definition of

that market there is 10 way to measure Food Machinery’s

ability to lessen or destroy competition.” Walker Process

Equipment, Inc. v. Food Machinery & Chemical Corp.,

supra, 382 U.S. at 177. See also Bernard Food Industries,

lac. v. Dietene Corp., 415 F.2d 1279, 1284 (7th Cir. 1969),

cert. denied, 397 U.S. 912 (1970).

The counterclaim filed by Hammons indicated the product to

be “ground black walnut shell,”’ and in submitting the matter to

the jury the trial court referred to “the soft grit abrasive

industry” and “hard nutshells within the soft grit abrasive

markets.” The patent refers to “‘an abrasive material comprising

pelletized nut shells having the hardness of black wa'nut shells.”

Our conclusion is that while the exact definition of the product

is elusive, the proof primarily related to crushed black walnut

and apricot pit nutshell used as SGA.

Assuming that the product was thus defined, the definition

of the geographic market is even less explicit. Since no attempt

was made to narrow the geographic area, we assume the relevant

market area is the entire United States. However, no market

data was introduced showing the total volume of sales of hard

nutshell SGA in the United States or any specified portion

thereof; therefore, it is difficult, if not impossible, to know

exactly what geographic market Hammons claims Agrashell

attempted to monopolize. The two principal submarkets

identified by Hammons were Detroit, Michigan and Columbus,

Ohio. In Detroit. Hammons apparently had the entire market.

and in Columbus, it had a larger share than Agrashell.

a eT

SAIC cite A en te ebidoestt

Not only did Hammons fail to show the total sales or vo

of SGA, it also failed to show what shares o} hat marke

ae Bes | Pee ke NEN eae g: Dali

held by Agrashell, Ttammons, and several’ other

competitors.? Continental was referred to as One of

largest companies in the field but no evidence was often

relating to its volume of sales. Only by asso iting widely

disconnected and at times contradictory’ portions of the

evidence is it possible to piece together the respective sales of

- Agrashell and Hammons.

Hammons’ pleadings attempted to structure the relevant

market to include LCM, but by supplemental brief Hammons

agreed that LCM was not within the markets the jury was

instructed to consider as being the target of the attempt.

In conclusion, we view the evidence relating to “dangerous

probability” in this case much as Judge Brown viewed the

evidence in Becker v. Safelite Glass Corp., Inc., 244 F. Supp.

625, 638 (D. Kan. 1965), in which he noted as follows:

“In the case at bar, plaintiff is unaware of the total

annual volume. of commerce * * * in the relevant market

area; the portion or percentage of that volume held by

defendants; the portion or percentage of that volume held

by the plaintiffs; and the portion or percentage of that

volume affected by any activities of the defendants * * *.

“Without the facts and evidence which plaintiff admittedly

does not have. a § 2 Sherman case simply cannot, in our

opinion, be established.”

9. Of the three manufacturers sued or threatened with suit by Agrashell

(Block, Gravette, and Hammons), Block continued to produce SGA

throughout the periods relevant here, Hammons sales nearly doubled, and

Hammons acquired the controlling interest in Gravette in 1966.

— 32 —

1971 , cert. denied, ‘404 U. S. 1049 (1 972); Hibner, Attempts to

Monopolize: A Concept in Search of Analysis, 33 A.B.A.J. 165,

171-177 (1967).

We are aware that the case of Lessig v. Tidewater Oil Co., 327

F.2d 459 (9th Cir.), cert. denied, 377 U.S. 993 (1964), is not in

accord with the result we have reached in this case, but we

choose not to follow its rationale,!° especially in view of the

fact that the case of Walker Process Equipment, Inc. v. Food

Machinery & Chemical Corp., supra, was decided by the

Supreme Court subsequent to the Lessig case and in view of the

decisions of this Court hereinbefore cited.

Other Alleged Errors

Agrashell claims that Hammons’ recovery of litigation

expenses was barred by principles of res judicata and

compulsory counterclaim. Our resolution of the sufficiency of

proof with regard to section 2 of the Sherman Act obviates the

necessity of resolving this issue with regard to litigation expense

damage. Likewise errors allegedly made in instructing the jury

with regard to litigation damages need not be discussed.

Agrashell further argues that Hammons’ section | claims

should have been pleaded as a compulsory counterclaim in the

first infringement suit filed by Agrashell against Hammons in

the Western District of Missouri. However, we think that the

instant case is controlled by Mercoid Corp. v. Mid-Continent

Co., 320 U.S. 661, 671 (1944). which indicates that cases such

10. The strength of the Lessig rationale in the Ninth Circuit is

questionable. See Bushie v, Stenucord Corp., 460 F.2d 116, 121 (9th Cir.

1972); Cornwell Quality Tools Co. v. C.T.S. Co., supra.

as this one involve permissive, not compukory, counterclaims.

Furthermore, since the first’ suit was dismissed because -of

Agrashell’s failure to join an indispensable party, since no

judgment on the merits was had, and since Agrashell: was

explicitly allowed to file a new action, which it elected to ‘do,

no injustice has resulted from permitting the filing of ‘the

counterclaim in this action.

Agrashell argues that the instructions were in error because of

a failure to adequately define Agrashell’s agency arrangements.

We do not think that’ if any error occurred that it was

prejudicial, and our resolution of the section | claim assumes

that valid agency relationships existed. Agrashell further argues

that it was an abuse of discretion to relieve Hammons of its

waiver of jury trial. Due to the complexity of this case and the

fact that Hammons changed from patent counsel to antitrust

counsel during the varying procedural phases of this case we do

not think that such a decision was an abuse of discretion. See

generally, 9C. WRIGHT & A. MILLER, FEDERAL PRACTICE

AND PROCEDURE § 2334 at 123 (1971 ).

Agrashell next argues that it was an abuse of discretion to

allow Hammons to deviate from a pretrial narrative statement

by introducing into evidence the deposition testimony of Cox

and Sirotta. Rule 16 of the Federal Rules of Civil Procedure

allows for modification of a pretrial order to prevent manifest

injustice. The trial judge explicitly indicated that he was acting

in the interest of justice and fair play in allowing the deposition

testimony, and indicated that the testimony might well have

not been available earlier because the parties were in litigation

in 1967 and could have been reluctant to speak. We do not

think that the decision in this case was an abuse of discretion.

See generally, 6 C. WRIGHT & A. MILLER, FEDERAL

PRACTICE AND PROCEDURE § 1527 at 608 (1971): Cf.

Labbee v. Roadway Express, Inc., 469 F.2d 169, 172 (8th Cir.

1972).

_eiFinally, Agrashell .argues. that it was error to exclude its

\vevidence of settlement. offers made to Hammons after the filing

~ “of; the: suit.. The trial judge indicated quite clearly that he was

~ afraid the probative value of this evidence was outweighed by i

‘the: prejudicial impact the evidence might have had on the jury.

‘We. think: the judge’s decision in this respect was carefully

considered and not error. Other allegations of error raised in the

briefs have been considered, but in our opinion are not valid

and do not require comment.

Conclusion

hah eth SIO we w=

We affirm that part of the judgment awarding Hammons

$41,750.00 trebled in the amount of $125.250.00. The

remaining judgment, consisting of litigation expense damages, is

reversed with directions to dismiss that portion of the case.

Attorneys’ fees and costs in the prosecution of this case should

be redetermined by the district court and substantially reduced

to an amount more in keeping with the revised judgment.

A true copy.

Attest:

Clerk, U.S. Court of Appeals, Eighth Circuit.

SAVES ARN LAER LS i AO

a a eater cal —_——

¢ ITD tak BO PAROS EE SLE L IS PEALE

w= 35 —

APPENDIX B

AGREEMENT

THIS AGREEMENT, made and entered into this Ist

day of November, 1950, by and between AGRASHELL,

INC. incorporated according to the laws of the State of

Delaware and having a place of business in the City of

Los Angeles, California, hereinafter designated as “Agra-

shell”, and AMERICAN WHEELABRATOR & EQUIP-

MENT CORPORATION, incorporated according to the laws

of the State of Delaware and having a place of business in

the City of Mishawaka, Indiana, hereinafter designated as

é American”,

WITNESSETH THAT:

WHEREAS, Agrashell is engaged in the manufacture

and sale of a non-metallic blast grit, composed of crushed

nut shells and like materials, which product is known as

“Shelblast”, and

WHEREAS, American is engaged in the manufacture

of centrifugal blast cleaning machines and other types of

equipment for cleaning, de-flashing and surface treating

of metals, plastics and various other materials, and is

vitally interested in and concerned with the matter of

having users of such equipment constantly and regularly

supplied with adequate amounts of abrasive of the type

and kind required and best suited for the successful, ef-

ficient, and proper operation of such equipment; and

WHEREAS, American desires to act as del credere

factor in the manner and to the extent herein defined for

the sale of Shelblast, as herein defined, made by Agrashell,

and Agrashell is willing to have American so act;

| SR emmmenersercare menses ert

ATL IW DT takes 0 che hve

NOW, THEREFORE for valuable consideration, the

receipt of which is hereby acknowledged by each and all

of the parties hereto, it is agreed by and between the

parties to this agreement as follows:

1. Agrashell hereby appoints American as a del

credere factor for Agrashell with authority to sell and

service Shelblast, as herein defined, without territorial limi-

tation, for the period and subject to the terms, conditions

and provisions hereinafter set forth.

2. American hereby accepts the sissilbiieei to act as

the del credere factor for Agrashell, with authority as afore-

said and agrees to comply with and perform the terms and

conditions to be performed by it, as stated herein.

3. American is hereby authorized to sell Shelblast,

manufactured and produced by Agrashell, to all classes of

users, except the rubber industry, the dental supply in-

dustry and the ornamental jewelry industry, said users

employing either dry or wet blast methods for cleaning,

de-flashing or surface treatment of metals, plastics and

other materials, at prices as provided in paragraph No. 10

hereof.

4. Each sale made by American of the products of

Agrashell, herein referred to, shall be made in the name of

American, and American agrees, as part of the consideration

for the compensation herein provided for, that it will bill

and collect for all shipments made by Agrashell, pursuant

of orders obtained by American; and American is hereby

authorized to do so.

5. Agrashell agrees that it will accept and fulfill all

orders for Shelblast obtained by American and trans-

mitted to it by American, and will promptly ship Shelblast

in fulfillment of such orders, provided, however, that

Agrashell shall be excused from performance of the re-

cad nes

siphieale Leta IITA ste 5

-_ 37

quirements of this paragraph, to the extent and so long as

prevented therefrom by reason of strikes, fires, delay of

carriers, acts of God and the public enemy, restrictions

imposed by competent governmental authority, or other

reasons beyond the control of Agrashell. If, for any of the

foregoing reasons Agrashell is unable to fulfill orders, it

shall immediately so notify American and American shall

then be free temporarily to obtain similar materials for its

requirements from other sources.

6. The parties hereto mutually agree that it is ex-

maintain any inventory upon consignment, or otherwise, of

Shelblast manufactured and produced by Agrashell, and

that all shipments made by Agrashell, in fulfillment of

orders obtained by American, and transmitted by it to

Agrashell, shall be shipped directly by Agrashell to the

buyer or buyers of such Shelblast from whichever plant or

warehouse operated by Agrashell will provide the most

advantageous transportation rates for the customer.

7. Agrashell agrees that it will pay to American, as

compensation of its services as del credere factor, with

respect to sales of Shelblast manufactured and produced by

Agrasheli, and for its services in directly or indirectly pro-

moting the sale of and servicing the products of Agrashell

and generally for all services to be rendered by American

under the terms of this agreement, a sales commission on

the sale of Shelblast amounting to - Percent of the

selling price.

8. Agrashell hereby agrees to grant to American

a Percent discount on the selling price of all Shelblast

ordered by American for use in its own plant for demonstra-

tion, experimental or research purposes,

9. As part of the obligation as a del credere factor,

American guarantees the due and prompt payment of all

amounts due and owing on account of all sales affected by

it; under the terms of this agreement, not later than the

25th day of the month following the month in which the

Shelblast produced by Agrashell is shipped by it in fulfill-

ment of orders submitted by American. Accounting and

settlement between the parties hereto shall be made in the

following manner:

Currently as shipments are made by Agrashell it will

notify American thereof. Such notice shall be in the form

of invoices, or other form as the parties hereto may agree

upon, which shall show the names of the parties or cus-

tomers to whom Shelblast has been shipped, the quantity

thereof so shipped, the price thereof and the amount of

commission on each shipment, and such notices shall be

accompanied by shipping documents. Agrashell agrees that

on or before the 10th day of each month it will send to

American credit memoranda, showing all commissions to

which American is entitled, on all orders for Shelblast

shipped and invoiced by Agrashell during the preceding

month, in accordance with the provisions of paragraph No.

7 hereof.

American agrees that on or before the 25th day of each

month, it will account to Agrashell for all amounts due to

Agrashell for all Shelblast, invoiced and shipped by Agra-

shell during the previous month, and at the same time

American will pay to Agrashell the amount shown by such

account to be owing by American to Agrashell, less any

amounts that may then be owing and due American by

Agrashell for commissions, in accordance with the pro-

visions of paragraph No. 7 hereof, and as shown by the

memoranda previously submitted by Agrashell on or before

the 10th day of the same month as above provided.

10. The selling prices of Shelblast manufactured or

produced by Agrashell, which American is authorized to

PR NRE F Ns LBA RORY NPL IDE Ted LM wt kegel idt

1) Ha SiR oe OLE POT MEET OLS LE

—= po

quote, and at which it is authorized to sell to customers,

shall in all cases, be such as may, from time to time be

announced by Agrashell. Such prices shall not be higher

than those quoted or used by Agrashell or any other dis-

tributors, and Agrashell expressly agrees that it will not

quote or sell to consumers or users at lower prices than

which American is aythorized to quote, or at which Ameri-

can is permitted to sell Shelblast for Agrashell. Agrashell

Shall notify American in writing of any changes in prices

ten (10) days prior to such date when such prices, as

changed, are put into effect. It is definitely understood that

Agrashell shall, at all times, have the right and power to

establish prices to consumers of the products manufactured

by it, herein referred to, which are sold or to be sold by

American as a del credere factor under the terms of this

agreement.

11. The terms of this agreement shall commence on

the date hereof and this agreement shall continue in force

between the parties hereto for an initial period of one (1)

year from and after this date, and this agreement shall

renew itself automatically for Successive one (1) year

periods, on each yearly anniversary date from and after

the date of this agreement, unless cancelled by either Ag-

rashell or American by giving written notice to the other

party at least sixty (60) days prior to said anniversary

date, stating that it chooses to cancel this agreement, in

which case this agreement shall then terminate on the

next yearly anniversary date.

12. Should bankruptcy proceedings be begun by or

against either of the parties hereto, designated as Agra-

shell or American, or an assignment made by either for

the benefit of creditors, or a receiver, voluntary or invol-

untary, be appointed for either of the said parties hereto,

then and in such event, at the option of the other party,

this agreement shall become null and void.

a ae

_ 18. Agrashell will protect American and hold it harm-

less by reason of any suits at law or equity, or for the in-

fringement of patents arising by reason of the sale of Shel-

blast manufactured by Agrashell.

14. This agreement shall be binding upon the suc-

cessors of the respective parties hereto, and shall not be

assigned by American, except to a person, firm or corpora-

tion taking over the business and good will of American

in the manufacture and/or sale of Wheelabrators or like

machines, and such assignment shall only be made where

the assignee assumes all of the obligations of American

under the terms of this agreement, and agrees to faithfully

perform the same. Otherwise, this agreement shall be

assigned only by mutual consent.

15. Upon termination of this agreement, as provided

for in paragraph numbered 11 hereof, American immedi-

ately will cease accepting orders for Shelblast and will

have no further responsibility or obligation as a del credere

factor or sales agent of Agrashell.

16. This contract is made in contemplation of the laws

of the State of Indiana and shall accordingly be construed

in accordance with the laws of that state.

IN TESTIMONY WHEREOF the parties hereto have

caused these presents to be signed, sealed and delivered by

their duly authorized corporate officers as of the day and

year first above written.

Attest: Agrashell, Inc.

/s/ John H. Linhardt By /s/ Joseph W. Ayers

President

Attest: American Wheelabrator &

/s/ C. R. Cline Equipment Corporation

By /s/ (Illegible)

President

* ~§

Seat ile OPS he

ps Ps pee eM CE 5 | ae

Te BY ep aS PERRYS § ee a

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