Appendix — Kestenbaum v. Falstaff Brewing Corp.

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Appendix - 1

KESTENBAUM v. FALSTAFF BREWING CORPORATION

Dana |. KESTENBAUM,

Plaintiff-Appelies,

FALSTAFF BREWING

CORPORATION,

Defendant-Appeliant.

No. 74-1878.

United States Court of Appesis,

Fifth Circuit.

June 16, 1975.

Wholesale distributor brought civil

antitrust suit against brewery and al-

leged that brewery violated Sherman

Act by price-fixing, by employing terri-

torial restrictions on resale of beer, by

participation in a general combination

and conspiracy in restraint of trade, and

by placing restraints on distributor's sale

of the distributorship. The United

States District Court for the Western

District of Texas, at Waco, Jack Roberts,

J., entered judgment in favor of distrib-

utor, and brewery appealed. The Court

of Appeals, Clark, Circuit Judge, held

that distributor failed to prove an injury

to his business resulting from brewery’s

asserted price-fixing actions and thus is-

sue of price “xing should not have been

submitted to jury, that jury should not

have been instructed that brewery would

be guilty of a per se violation of anti-

trust laws if jury found that brewery

dictated sale price of distributorship, and

that the trial court erred in submitting

to jury the issue of whether brewery

was guilty of restraining sales to cus-

tomers outside distributor's prescribed

geographical area.

Reversed and remanded.

1. Monopolies—28(7.1, 7.2)

In order to recover treble damages

under Clayton Act, plaintiff must prove

a violation of the antitrust laws by the

defendants, an injury to his business re-

sulting from the defendants’ wrongful

actions, and some indication of the

amount of the damage done. Clayton

Act,s 4.15 U.S. C. A. 6 15.

2. Monopolies—17(1.3)

Brewery s policy of automatically

raising its selling price to wholesale dis-

tributor by one-half of amount of any

price increase imposed by distributor in

adherence to brewe “stay competi-

tive” requirement might be classified as

arbitrary, but such increase wes not it-

self violative of antitrust laws, and did

ceiling requirement which wes 8 per se

violation. Clayton Act, s 4,15 U.S. C. A.

s 15; Sherman Anti-Trust Act, s 1, 15

U.S. C. A. 3 1.

Act, s 4, 15 U.S. C. A. 6 15;

Anti-Trust Act, s 1, 15 U.S. C. A. 6 1.

4. Monopolies—28(8)

Where wholesale distributor failed

to offer any competent evidence to es-

tablish that brewery’s allegediy wrongful

price · fixing activity produced injury to

him, no jury issue existed. Clayton Act,

s 4, 15 U.S.C.A. 8 15; Sherman Anti-

Trust Act, s 1,15 U.S.C.A. 8 1.

. Monopolies—28(7.5, 7.6)

Even if wholesale distributor had

not admitted that brewery’s “stay com-

petitive’ policy was logical and proper,

and had proffered evidence indicating

that requiring him to meet prices of oth-

er similar products caused him injury,

distributor's price-fixing claim was defi-

cient and did not furnish basis for recov-

ery of treble damages, where brewery

did not violate any antitrust stricture by

raising its price to its wholesalers, and

distributor's only proof of extent of inju-

ry was calculation of sum ot brewery’s

increased selling price to him. Clayton

Act, 84, 15 U.S.C.A. 5 15; Sherman

Anti-Trust Act, s 1, 15 U.S. C. A. 5 1.

6. Monopolies—28(7.6)

Leniency should be permitted in

showing damages in private antitrust ac-

tions, but a damage assessment based

wholly on speculation and rk is

improper. Clayton Act, s 4,15 U.S. C. A.

s 15.

7. Monopolies—28(7.2)

In light of admission of wholesale

distributor, who attacked brewery’s price

promotions in which he sold beer at a

discount as a type of price-fixing, that

he would have participated in some such

promotions voluntarily as a matter of

sound business practice, it was incum-

bent upon distributor to reveal what pro-

Synopess, Syliabi and Key Number Cir sificatioe

COPYRIGHT © 1975, by WEST PUBLISHING CO.

The Synopees, Syllabi and Key Number Cin

cation constitute no part of the opinion of the court.

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Appendix - 2

6027 KESTENBAUM v. FALSTAFF BREWING CORPORATION

6028

portion of the total costs were attributa-

ble to such voluntary promotions as well

as showing what sales gains and losses

he experienced before and after he un-

willingly followed brewery’s require-

ments, and without such proof a jury

could not compute the amount of loss

recoverable on a basis other than mere

speculation and rk. Clayton

act, s 4, 15 U.S. C. A. 8 15; Sherman

Anti-Trust Act, s 1,15 U.S. C. A. 5 1.

8. Monopolies—28(9)

Wholesale distributor, who attacked

brewery s price promotions in which he

sold beer at a discount as a type of

price-fixing scheme, did not have a right

to recover ali costs incurred in price-fix-

ing promotions regardiess of whether he

was compelled to participate, or partici-

pated voluntarily. Clayton Act, s 4, 15

U.S. C. A. 8 15; Sherman Anti-Trust Act,

¢$1,1ISUSC.A. 3 1.

9. Monopolies 28 (7. 1)

Even if brewery dictated sale price

of distributorship franchise, brewery

would not be guilty of a per se violation

of antitrust laws. Clayton Act, 3 4, 15

U.S. C. A. s 15: Sherman Anti-Trust Act,

s1,15USCA. 31

10. Monopolies—17 (2.3)

Any restraint on sale price of dis-

tributorship franchise legitimately im-

posed by brewery to safeguard distribu-

tion-rights privilege did not have such a

deleterious impact as to create antitrust

illegality as a matter of law, and rather

necessitated an inquiry into the business

Purpose and reasonbleness of the re-

straint employed, and should be meas-

ured under rule of reason standard.

Clayton Act, s 4, 15 U.S. C. A. 8 15; Sher-

man Anti-Trust Act, s 1, 15 U.S.C.A.

$1.

11. Monopolies—17(2.1)

Brewery could legitimately restrict

class of persons with whom it would

agree to continue a distributorship fran-

chise, so long as such restriction was not

artifically employed to further some un-

lawful practice. Clayton Act, s 4, 15

U.S. C. A. s 15; Sherman Anti-Trust Act,

s1,1SUSC.A. 8 1.

12. Monopolies—17 (2.1)

A refusal to deal becomes illegal un-

der Sherman Act only when it produces

an unreasonable restraint of trade.

Sherman Anti-Trust Act, s 1, 15 US.

CA. 31.

13. Monopolies—17(2.3)

Brewery had a right to restrict sales

price of one of its distributorship fran-

chises to the reasonabie value of that

franchise in order to insure that the pur-

chaser would have a chance to realize a

reasonable return on its investment.

Sherman Anti-Trust Act, s 1, 15 US.

C. A. 6 1.

14. Monopolies- 17(2.3)

Test of antitrust legality of brew.

ery’s restraint, if any, on sale price of

one of its distributorship franchises was

whether the effect upon competition in

market place was substantially adverse.

Sherman Anti-Trust Act, s 1, 15 U.S.

C. A. 6 1.

15. Monopolies--12(1.10)

Only those acts, contracts or agree-

ments which unduly obstruct the due

course of trade, or which injuriously re-

strain trade because of their inherent na-

ture or effect, or because of their evi-

dent purpose are unlawful under rule of

reason. Sherman Anti-Trust Act, s 1,15

U.S. C. A. 3 1.

16. Monopolies 28 (8

Jury should not have been permitted

to consider issue of whether brewery

was guilty of restraining sales to cus-

tomers outside wholesale distributor's

Prescribed geographical area, in absence

of any proof of extent of damage to

distributor's business proximately caused

by such customer restraint. Clayton

Act, s 4, 15 U.S. C. A. s 15; Sherman

Anti-Trust Act, 6 1,15 U.S. C. A. 6 1

17. Monopolies—28(7.2)

Wholesale distributor, who sought to

recover trebie damages on basis of brew-

ery's alleged violation of Sherman Act

by employing territorial restrictions on

resale of beer, was required to proffer

evidence which would provide a reasona-

bie basis for estimating the extent of

injury caused by such a territorial re-

striction. Clayton Act, s 4, 15 U.S.C.A.

6 15; Sherman Anti-Trust Act, s 1, 15

U.S.C.A. 5 1.

18. Damages—6

Where wrong is of such a nature as

to preclude exact ascertainment of

amount of damages, plaintiff may recov-

er upon a showing of the extent of the

damages as e matter of just and reason-

able inference, although the result may

be only an approximation.

Appendix - 3

KESTENBAUM v. FALSTAFF BREWING CORPORATION

19. Damages—6

Wrongdoer may not complain of

inexactness where his actions preclude

precise computation of the extent of the

injury.

20. Damages—6

An award may not be based solely

upon speculation or guesswork.

21. Monopolies—28 (9)

Specific elements to be considered in

caiculating good will“ value of a busi-

ness in a civil antitrust suit are the

amount of profits the business has made

over and above an amount fairly attrib-

utable to return on capital investment

and to labor of owner, and whether

there is @ reasonable prospect that this

additional profit will continue into fu-

ture, considering all circumstances exist-

ing and known as of date of the valua-

tion. Clayton Act, s 4,15 U.S. C. A. 5 15.

22. Evidence—474(16)

Wholesale distributor's estimation of

“good will“ value of his business would

be admissible in civil antitrust suit.

Clayton Act, s 4, 15 U.S. C. A. s 15; Fed-

eral Rules of Evidence, rule 702, 28 US.

C.A.

23. Federal Civil Procedure—1194

An owner is competent to give his

opinion on value of his property. Feder-

al Rules of Evidence, rule 702, 28 US.

C.A.

24. Federal Civil Procedure—1194

An owner’s opinion on value of his

Property is subject to attack through

cross-examination or independent evi-

dence refuting the owner's estimate,

with jury as fact finder shouldering the

responsibility of judging the credibility

of the witness, resolving the conflicting

evidence, and assessing the weight of

Opinion testimony. Federal Rules of Ev-

idence, rule 702, 28 U.S. C. A.

25. Federal Civil Procedure—1211

Where owner bases his estimation of

value of his property solely on specula-

tive factors, owner's testimony may be

of such minimal probative force to war-

rant a judge's refusal even to submit the

issue to jury. Federal Rules of Evi-

dence, rule 702, 28 U.S.C.A.

26. Monopolies—28(7.2)

A plaintiff in a private antitrust ac-

tion need only show that restraint of

trade tends or is reasonably calculated to

PE REN TO A MNS ELEN DIS. “bert

PP

Prejudice the public interest, and is not

required to shoulder the more onerous

burden of proving specific economic inju-

ry to competition. Clayton Act, s 4, 15

U.S. C. A. s 15; Sherman Anti-Trust Act,

8 1,15 U.S. C. A. 6 1.

27. Monopolies—28(7.6)

Mere showing of violation of anti-

trust laws and individual damage, and

not of public injury, is insufficient to

permit recovery under a private re-

straint of trade claim. Clayton Act, 5 4,

15 U.S.C.A. s 15; Sherman Anti-Trust

Act, § 1,15 U.S.C.A. 5 1.

Appeal from the United States Dis-

trict Court for the Western District of

Texas.

Before GOIDBERG, CLARK

GEE, Circuit Judges:

CLARK, Circuit Judge:

and

This is an appeal by the defendant,

Falstaff Brewing Corporation, from a

jury verdict in favor of the plaintiff,

Dana |. Kestenbaum, in a civil antitrust

suit brought under Section 4 of the Clay-

ton Act, 15 U.S.C. 5 15, to recover dam-

ages to Kestenbaum’s business as a

wholesale distributor of Falstaff Beer.

The Kestenbaum distributorship was

begun in 1934 by Dana Kestenbaum’s

father, Sam Kestenbaum, and originally

encompassed within its area of primary

responsibility Milam, Robertson, Burle-

son, Brazos, Falls and Bell counties, Tex-

as. Prior to the years at issue in this

controversy, Bell and Felis counties were

transferred to other distributorships.

Dana Kestenbaum became an active

partner in the distributorship in 1950.

He was in complete control from 1967

until he sold the distributorship in 1971,

allegedly because he could no longer fi-

nancially endure Falstaff's anticompeti-

tive practices. Actually, Kestenbaum

sold the distributorship territory in three

Separate transactions, again allegedly

under duress, with Milam county

going to Falstaff's Taylor, Texas distribu-

tor, Robertson county to Faistaff’s Mar-

lin, Texas distributor, and Burleson and

Brazos counties to Kestenbaum’s former

manager.

At trial Kestenbaum asserted Faistaff

had violated Section 1 of the Sherman

Act, 15 U.S.C. § 1. More particulariy, he

charged them with: (1) price fixing, (2)

employing territorial restrictions on the

LPR ATW, e TN Gk QU INES

Appendix - 4

6029

6030

6031

resale of Falstaff beer, (3) participation

in a general combination and conspiracy

in restraint of trade, and (4) placing

restraints on his sale of the

distributorship.' From a jury award of

60,517.00 dollars, trebled by the trial

court to 181,551.00 dollars, Falstaff has

perfected this appeal.

in this court, Falstaff excepts to the

trial court’s charge, challenges the suffi-

ciency of the proof of damage and ques-

tions the method employed to measure

damages. The record does establish er-

ror in regard to some of Kestenbaum’s

contentions. The trial court having cho-

sen not to utilize the special verdict pro-

cedure of Fed.RCiv.P. 4910, which

would have revealed the jury's resolution

of the verious theories of liability ad-

vanced,” we are left with no alternative

but to reverse and remand the entire

proceeding.

{1] tn Terreli v. Household Goods

Carriers’ Bureau, 494 F.2d 16, 20, (5

Cir.) rehearing en banc denied, 496 F 2d

878 (5 Cir.) cert. dismissed, —U.S.—, 95

S.Ct. 246, 42 L.Ed.2d 260 (1974), we

stated: in order to recover treble dam -

under Section 4 of the Clayton Act,

{plaintiff must] prove a violation of the

antitrust laws by the defendants, an in-

1. Kestenbaum charges that Falstaff,

through its franchise agreement with

him and its superior economic position:

(1) imposed territorial restrictions by

denying him the right to sell to retail

establishments outside his four-county

franchise area; (b) fixed the prices at

which he sold beer to retail accounts

and arbitrarily raised its price to him

by one-half of ali wholessie price

increases he instituted pursuant to its

directives; (c) periodically required him

to participate in price promotions Ly

directing that he sell at a specified dis-

count off regular price and stand one-

half of the loss resulting from the dis-

counted price; Id) required him to

maintain unnecessary warehouse

facilities in Caidwell and Cameron,

Texas in furtherance of its market

allocation policy; le) required him to

Participate in unneccessary ber spending

and advertising promotions; (f) made

unwarranted criticisms and threats of

termination if he did not follow its

directives; and (g) required that he sell

his distributorship at a price set by

Falstaff.

KESTENBAUM v. FALSTAFF BREWING CORPORATION

jury to his business resulting from the

defendants’ wrongful actions, and some

indication of the amount of the damage

done. See Hobart Bros. Co. v. Maicoim

T. Gilliland, loc., 471 F.2d 894, 901-902

(Sth Cir.), cert. denied, 412 U.S. 923, 93

S.Ct. 2736, 37 L.Ed.2d 150 (1973); Shaw

v. Mobile Oi Corp., 60 F.R.D. 566, 568

(D.N.H.1973). Kestenbaum failed the

second of this three-pronged test, /. e., he

failed to prove an injury to his business

resulting from the defendants’ asserted

price-fixing actions. Thus, the trial

court erred in submitting the issue of

price fixing to the jury.

According to Kestenbaum’s testimony,

at all times while he was a distributor

Falstaff fixed the prices at which he sold

beer to retail accounts. Until about

1966, this price fixing allegedly consisted

of instructions to distributors directing

that predetermined prices be instituted

at specified times. During the period

from 1966 until 1971 when Kestenbaum

sold his distributorship, Falstaff alleged-

ly indirectly controlled his prices by in-

structing him to stay competitive with

other local or “popular” brands.” With

this directive to remain competitive, Fal-

staff instituted a policy of automatically

raising its selling price to Kestenbaum

by one-half of the amount of any price

increase imposed by him in adherence to

Falstaff's stay competitive require-

2. See Brown, Federal Special Ver-

dicts: The Doubt Eliminator, 44 F.R.D.

245 at 338 (1967): Ford Motor Co. v.

Dailas Power & Light Co., 499 F.2d

400, 412 n. 19 (5th Cir. 1974); Sim-

mons v. King, 478 F.2d 857, 862 n. 12

(Eth Cir. 1973); Boyce v. Pi Kappa

Aipha Holding Corp., 476 F.2d 447,

453 (Sth Cir. 1973) (Brown, C. J.,

concurring); Wolfe v. Virusky, 470 F. 20

831, 837 (Sth Cir. 1972) (Brown, C. J.,

concurring); Burns v. Anchor-Wate Co.,

469 F.2d 730, 734 n. 8 (Sth Cir.

1972); In re Double D. Dredging Co.,

Inc., 467 F.2d 468, 469 n. 3 (5th Cir.

1972); Little v. Bankers Life & Cas.

Co., 426 F. 2d 509, 517 (Sth Cir. 1970)

(Brown, C. J., concurring); Home v.

Georgia Southern & Fiorida Ry. Co.,

421 F.2d 975, 980 (5th Cir. 1970)

(Brown, C. J., concurring).

3. F. g., Pearl, Lone Star and Jax.

Other brands, such as Schlitz and

ed premium“

beers and sold at a slightly higher price

than popular beers.

Fe RETAIL. NFAT SI GS EIS

Appendix - 5

KESTENBAUM v. FALSTAFF BREWING CORPORATION

ment. Kestenbaum claimed that this

latter price-fixing scheme damaged him

in the one-half increase amounts Fal-

staff was assessing him under its auto-

matic price increase policy. He admitted

at trial however, that he would have re-

mained competitive in the absence of

any coercion by Falstaff. The evidence

further disclosed that several other Fal-

staff distributors who attempted to go

higher than the popular price level were

met with drastic reductions in sales.

{2-4] Kestenbaum submits that al-

though it is true that he would have

stayed competitive with popular brands

even without a directive from Falstaff,

when Falsta‘f’s requirement that he do

so was coupled with its taking of one-

half of all additional revenue from hic

price increases on retail accounts, a situ-

ation was created in which he was not

free to realize the percentage of profit

that could have been attained absent this

requirement. To reason that the amount

of this diminished profit established any

measure of antitrust damage is a non

sequitur in today’s case. While Fel-

staff 's increase in price to Kestenbaum

may be classified as arbitrary, such in-

crease is not itself violative of the anti-

trust laws, nor does it afford a basis for

proof of injury even though it is coupled

with a price ceiling requirement which is

a per se violation. A prerequisite to

Kestenbaum’s recovery on this issue was

a showing that the price ceiling on sales

by him, disregarding the price charged

to him, caused injury. Not only did he

fail to prove this, he established that the

wholesale price which Falstaff allegedly

fixed was a proper price. While the fact

of injury often involves evidentiary

questions which are properly for the jury

le. g., Storey Parchment Co. v. Paterson

Parchment Paper Co., 282 U.S. 555, 562,

51 S.Ct. 248, 250, 75 L.Ed. 544, 548

{1931)], no jury issue exists where, as

here, the plaintiff fails to offer any com-

petent evidence to establish that the de-

fendant’s wrongful price-fixing activity

produced injury to him.

[5,6] Even if Kestenbaum had not

admitted that the “stay competitive”

policy was logical and proper, and had

proffered evidence indicating that re-

quiring him to meet the prices of other

similar products caused him injury, this

claim still would be deficient for failure

to meet TJerrell’s third requirement—

that the proof give some indication of

the extent of the injury. Kestenbaum

3

6031

6032

claims his damages were 25,000 dollars,

the sum of Falstaff’s increased selling

price to him, based upon one-half of al!

of his increases to retailers. Under the

facts shown in this case, Falstaff did not

violate any antitrust stricture by raising

its price to its wholesalers. Kestenbaum,

therefore, by introducing only the 25,000

dollar calculation to support his claim for

damages for wholesale price fixing, has

failed to offer any compatent evidence

on the amount of damage. We recog-

nize that leniency should be permitted in

showing damages in private antitrust ac-

tions, however, a damage assessment

based wholly on speculation and guess-

work is improper. FE. g., Bigelow v.

RKO Pictures, 327 U.S. 251. 264-65, 66

S.Ct. 574, 579-80, 90 L.Ed. 652 (1946).

Because proper proof of injury and of

damage was missing, the district judge

should have directed a verdict for de-

fendant on this aspect of plaintiff's

price-fixing claim. If the jury calculated

any part of its damage award on the

sum of Falstaff’s price increases to Kes-

tenbaum, it was error. Under the enig-

matic general verdict we connot know

whether they did or not, so the verdict

cannot stand.

{7] Plaintiff also attacks Falstaff’s

price promotions, in which he sold Fal-

staff beer at a count, as a type of

price-fixing scheme. Again plaintiff has

failed to meet his burden of establishing

a@ net economic toss. Having admitted

that he would have participated in some

such promotions voluntarily as a matter

of sound business practice, it was incum-

bent upon Kestenbaum to reveal what

proportion of the total costs were attrib-

utable to such voluntary promotions as

well as showing what sales gains and

losses he experienced before and after he

unwillingly followed Falstaff’s require-

ments. Without such proof a jury could

not compute the amount of loss recover-

able on a basis other than mere specula-

tion and guesswork. Bigelow v. RKO

Pictures, supra.

[8] Kestenbaum cites Perma Life

Mufflers, Inc, v. International Paris

Corp., 392 U.S. 134, 88 S.Ct. 1981, 20

L.€d.2d 982 (1968), as authority for the

proposition that he has the right to re-

cover all costs incurred in price-fixing

Promotions regardiess of whether he wes

compelled to participate, or participated

voluntarily. Perma Life will not support

such a broad rule. While the Supreme

Court did hoid that an injured party may

e

as ns

Appendix - 6

6032 KESTENBAUM v. FALSTAFF BREWING CORPORATION

not be denied any recovery merely be-

cause he has participated to the extent

of utilizing ilege! arrangements formu-

lated and carried out by others, it went

on to say that by-products of a restric-

tion inuring to s plaintiff's benefit can

be considered in computing damages.

d at 140, 88 S.Ct. 1985.“ Proof of the

extent of this benefit is precisely what

was lacking here

9,10] The trial court erred in in-

structing the jury that if they found

that Falstaff dictated the sale price of

Kestenbaum’'s distributorship, Falstaff

would be guilty of a per se violation of

the antitrust laws.” The per se rule was

judicially created to deter agreements or

practices constituting unreasonabie re-

straints on trade, having such a perni-

cious effect on competition and so lack-

ing in any redeeming virtue that a decla-

ration of illegality could be made with.

out elaborate inquiry into the precise

harm they cause or the business excuse

for their use. F. g., United States v

Topeo Associates, lac, 405 US 596,

607, 92 S.Ct. 1126, 1133, 31 L.Ed.2d

515 (1972); White Motor Co. v. United

States, 372 U.S. 253, 262, 83 S.Ct. 696.

701, 9 L.€d.2d 738 (1963); Northern Pa-

cific R R. Co. v. United States, 356 US.

1, 5, 78 S.Ct. 514. 518, 2 C. Ed. 2d 545

(1958). Under the particular facts of the

case sub judice, where the price fixer

must extend the very distribution-rights

privilege which gave Kestenbaum’s bus

ness its value, any restraint legitimately

imposed to safeguard that privilege does

not have such a deleterious impact as to

create illegality as a matter of law

Rather, this type of situation necessi-

tates an inquiry into the business pur-

pose and reasonableness of the restraint

employed, and must be measured under

4 We would also note that Perma Life

expressly pretermitted deciding

whether complete involvement in and

voluntary support of a monopolistic

scheme might bar an antitrust cause of

action. Our conclusion that Perma L ife

wes not intended to completely exclude

the element of voluntariness as a de-

fence to an antitrust claim accords with

decisions from other circuits. Premier

Electrical Constr. Co » Miller-Davis

Co., 422 F.2d 1132, 1138 (7th Cw.

1970), interpreted Perma Life to hoid

that only those plaintiffs “who do not

bear equa! responsibility for creating

the rule of reason standard.

[11,12] it is beyond question, and the

trail judge correctly so charged, that

Falstaff may legitimately restrict the

class of persons with whom it would

agree to continue a Falstaff franchise, so

long as such restriction wes not artifi-

cially employed to further some unlawful

practice. F. g., United States v. Arnold

Schwinn & Co., 388 U.S. 365, 376, 87

S.Ct. 1856, 1864, 18 L.Ed.2d 1249

(1967); United States v. Colgate & Co

250 U.S. 300, 307, 39 S.Ct. 465, 468, 63

L.Ed. 992 (1919). A refusa! to deal be-

comes illegal under the Sherman Act only

when it produces an unreasonabie re-

straint of trade. E g.. United States v

Park, Davis & Co., U.S. 29, 45-46, 80

S.Ct. 503, 512-13, 4 L. d. 2d 505 (1960);

Lorain Journal Co. v. United States, 342

U.S. 143, 155, 72 S.Ct. 181,187, 96 L.Ed.

162 (1951); Kiefer-Stewart Co. v. Joseph

E. Seagram & Sons, 340 U.S. 211, 214,71

S.Ct. 259, 261, 95 L.Ed. 219 (1951).

113] it logically follows that Falstaff

has a right to restrict the sales price of

one of its distributorship franchises to

the reasonable value of that franchise in

order to insure that the purchaser wil!

have a chance to realize a reasonable

return on his investment. Falstaff

clearly has a strong interest in the finan-

cial vitality of a new franchisee. It the

purchaser of a franchise makes a bad

bargain when he buys, then he cannot

give the distributorship the solid, con-

cerned management which it must have

to be successful for him and to enhance

Falstaff's image and relative position in

the market.

A franchisor’s limited right to partic:-

pate in negotiations of a franchise sale

has previously been recognized by this

court in Frank Coulson, Inc.—Buick v

General Motors Corp., 488 F.2d 202 (5th

and establishing an illegal scheme, or

who are required by economic pressures

to accept such an agreement, should not

be barred from recovery simply be-

cause they are participants.’’ Columbia

Nitrogen Corp. v. Royster Co., 451 F.

3, 15-16 (4th Cir. 1971), citing Perma

Life and Premier Electrical, concluded

that a party who voluntarily formulates

and equally participates in a non-

coercive agreement restraining trade

cannot maintain a t 1 Sherman Act

action against its partner.

5. See note 7 infra.

Pe Ra ier

Appendix - 7

KESTENBAUM v. FALSTAFF BREWING CORPORATION

Cir. 1974), a tort action to recover for

interference in contractual negotiations.

In Frank Coulson, inc, we held that an

automobile manufacturer possessed a

limited privilege to approve or disap-

prove a prospective purchaser since it

would deal with the purchaser in the

future and he would represent it to the

public. This privilege further extends to

the degree of contro! over the dealer's

sale price necessary to ensure that the

new dealer starts off financially sound.

Accord, Pierce Ford Sales, Inc. v. Ford

Motor Co., 299 F.2d 425, 429 (2nd Cir.),

cert. denied, 371 U.S. 829, 83 S.Ct. 24,9

L.3d.2d 66 (1962); Martin v. Texaco,

Inc.,304 F.Supp. 498, 502-504 (S.D.Miss.

1969).

[14,15] On retrial, the jury must de-

cide whether Falstaff restrained the sale

price which Kestenbaum could receive,

and, if so, whether such restraint was

adopted for good business reasons and

not to injure competitors. The test of

antitrust legality of such a restraint is

whether the effect upon competition in

the marketplace is substantially adverse.

United States v. Arnold Schwinn & Co.,

supra. Only those acts, contracts or

agreements which unduly obstruct the

due course of trade, or which injuriously

restrain trade because of their inherent

nature or 2ffect, or because of their evi-

dent purpose are unlawful under the

rule of reason. F. g., United States v.

American Tobacco Co., 221 U.S. 106, 31

S.Ct. 632, 55 L.Ed. 663 (1910).

116] The trail court erred in submit-

ting to the jury the issue of whether

Falstaff was guilty of restraining sales

to customers outside Kestenbaum’s pre-

scribed geographical area. It was im-

proper to permit the jury to consider this

aspect of territorial restriction since Kes-

tenbaum failed to offer any proof of the

extent of damage to his business proxi-

mately caused by such customer re-

straint. Kestenbaum's only proof relat-

ing to this issue was his testimony that

on one occasion he had been reprimanded

by Falstaff for selling to a retailer who

resided outside his four-county territory,

6. Kestenbaum testified Falstaff's re-

quirement that he maintain warehouse

facilities in Caldwell, Cameron and

Bryan, rather than just one werehouse in

Bryan as he requested, caused the un-

necessary stockpiling of inventory,

6033

6034

plus his testimony and that of several

other witnesses that it was Falstaff's

policy to restrict a distributor's sales to

retailers located within the area covered

by his franchise agreement. Kesten-

baum never attempted to show the

amount of monetary injury suffered be-

cause of loss of sales to retailers outside

his territory—sales that reasonably would

have been made but for Falstaff’s

territorial restriction policy.

[17] Again, the rule of Ferre re-

quires evidence which would provide a

reasonable basis for estimating the ex-

tent of injury caused by such a territori-

al restriction. Erroneous inclusion of the

customer restraint element in the court's

charge despite the complete lack of dam-

age proof may have been prejudicial to

Falstaff, since this instruction could have

been misinterpreted by the jury to au-

thorize an award on Kestenbaum’s sepa-

rate claim for unnecessary warehouse

costs. Since both allegations were ar-

gued under the general territorial re-

Striction claim the jury may well have

mistakenly awerded the amount of such

unnecessary warehouse costs incurred

within the assigned area upon ea determi-

nation that Kestenbaum was wrongfully

restrained from seeking customers out-

side of his allotted territory. The gener-

al verdict does not permit us to know

whether this occurred.

While the composition and content of

the charge is for the trial court in the

first instance, we would observe that if

Kestenbaum makes the requisite proof to

entitle him to a charge on the imposition

of unwarranted and unnecessary ware-

housing and distribution costs the dam-

ages attributable to such costs could be

more easily understood if the measure of

those damages were presented in a sin-

gle instruction on that subject. If such

@ charge is cast as a liability-damage

unit it would minimize the risk of sow-

ing seeds of confusion between damages

claimed to have arisen from activity re-

quired within the territory assigned (un-

necessary warehouse costs) and activity

proscribed without the territory (solicit-

ing customers in other counties). Be-

cause these two elements have a surface

sameness, care shoulc be taken to pre-

thereby increasing interest, expense, in-

surance, transportation costs, and ex-

Penditures. Kestenbaum assessed his

damages for this alleged violation at

49,115.05 dollars.

Appendix - 8

serve their truly separate nature. Such

an approach would also minimize the

hazard that double damages would be

awarded. Such a hazard is suggested

since we note that plaintiff's counsel not

only was allowed to argue Falstaff's al-

leged unnecessary warehouse costs as

damages resulting from territorial allo-

cation but also pointed to such damages

as caused by a general combination and

conspiracy in restraint of trade.

IV

Falstaff asserts that Kestenbaum’s

personal assessment of the good will val-

ue of his distributorship forms an insuf-

ficient basis to support a jury verdict.

Kestenbaum retorts that his testimony is

supported by the long history of the dis-

tributorship, additional testimony con-

cerning the good will created during the

distributorship's many years of operation

and documentary evidence of the profits

realized during those years. This sup-

porting evidence, he contends, is suffi-

cient to establish a reasonable founda-

tion for his opinion on the good will of

the business.”

In light of our decision to remand on

other grounds it is unnecessary for us to

rule on the sufficiency of plaintiff's

proof of damage from a restriction on

distributorship sale price. However,

since the issue must be relitigated it is

appropriate to speak to the general rules

which govern its proper disposition.

[18-20] in a case such as this, where

the wrong is of such a nature as to pre-

clude exact ascertainment of the amount

of damages, plaintiff may recover upon

a showing of the extent of the damages

as a matter of just and reasonable infer-

ence, although the result may be only an

approximation. Story Parchment Co. v.

Paterson Parchment Paper Co., supra

282 US. at 563, 51 S.Ct. at 250. The

wrongdoer may not complain of inexact-

ness where his actions preciude precise

computation of the extent of the injury.

Eastman Kodak Co. v. Southern Photo

Co., 273 U.S. 359, 379, 47 S. Ct. 400, 71

7. Kestenbaum placed the good will

value of his distributorship at 49,000

dollars. Falstaff, on the other

hand, ahd approximated the good will

value at 25,000 dollars. With Falstaff's

approval, Kestenbaum ultimately sold

the distributorship for a tote

consideration of 30,000 dollars

above the value of assets and

NIRS SER ORM RET. CRY AS EM TNR CLs ae W

KESTENBAUM v. FALSTAFF BREWING CORPORATION

L.Ed. 684 (1927). An award may not be

based, however, solely upon speculation

or guesswork. Bigelow v. RKO Radio

Pictures, Inc., supra 327 U.S. at 267, 66

S.Ct. at 580. See also Terrell v. House-

hold Goods Carriers’ Bureau, supra at

23-24.

{21] The specific elements to be con-

sidered in calculating the good will”

value of a business are: (1) What profit

has the business made over and above an

amount fairly attributable to the return

on the capital investment and to the le

bor of the owner?; (2) What is the rea-

sonable prospect that this additional

profit will continue into the future, con-

sidering all circumstances existing and

known as of the date of the valuation?”

Standard Oil Co. v. Moore, 251 F.2d 188,

219 (9th Cir. 1957), cert. denied, 356 US.

975, 78 S.Ct. 1139, 2 L.Ed.2d 1148

(1958); Simpson v. Union Oil Co., 411

F.2d 897, 909 (9th Cir.) rev'd on other

grounds, 396 U.S. 13, 90 S.Ct. 30, 24

L. Ed. 2d 13 (1969); Central Coal and

Coke Co. v. Hartman, 111 F.2d 96, 98-99

(8th Cir. 1901); Vanderveide v. Put and

Cali Brokers and Dealers Ass n, 344

F Supp. 118 (S.D.N.Y. 1972).

122.231 We cannot know whether the

new Federal Rules of Evidence will con-

trol relitigation of this case. See Pream-

ble, Pub.Law 93-595, 88 Stat.1926 (Jan.

2, 1975)“ However, whether present ev-

identiary rules or the new Federal Rules

are applied, Kestenbaum’s estimation of

the sum of the above valuation elements

will be admissible since under both an

owner is competent to give his opinion

on the value of his property. This rule,

established by the weight of present au-

thority, le. g., Berkshire Mutual Ins. Co.

v. Moffett, 378 F.2d 1007 (5th Cir

1967); Lee Shops, Inc. v. Schatten

Cypress Co., 350 F.2d 12 (4th Cir.), cert.

denied, 382 U.S. 980, 86 S.Ct. 552, 15

L.Ed.2d 470 (1965); Hartford Fire Ins.

Co. v. Cagle, 249 F.2d 241 (10th Cir.

1957); Lawton v. Strong, 249 F.2d 299,

302 (6th Cir. 1957); Universal Pictures

Co. v. Harold Lioyd Corp., 162 F.2d 354

inventory.

8. The new Federal Rules of Evidence

become effective on July 1, 1975, and

apply to all proceedings then pending,

except to the extent that application

of the rules would not be feasible, or

would work injustice, in which event

former evidentiary principles apply

enen RL oe Tee LAME REGIS G OIE LO BOON © SIN Bie

Appendix - 9

KESTENBAUM v. FALSTAFF BREWING CORPORATION 6036

6037

(9th Cir. 1947)“ has now been

codified in Rule 702 of the new Federal

Rules of Evidence. Rule 702 provides:

“a witness qualified as an expert by

knowledge, skill, experience, training, or

education, may testify [to specialized

knowledge] in the form of opinion or

otherwise.

124. 25] An owner's opinion on value,

however, is subject to attack through

cross-examination or independent evi-

dence refuting the owner's estimate (Hil-

lin v. Hagler, 286 S.W.2d 661 (Tex.Civ.

App.1956)), with the jury as fact-finder

shouldering the responsibility of judging

the credibility of the witness, resolving

the conflicting evidence, and assessing

the weight of opinion testimony. Ter-

rell, supra at 24; Hobart Brothers Co. v.

Malcolm T. Gilliland, inc., supra at 903

Under certain circumstances, however,

for instance where the owner bases his

estimation solely on speculative factors,

the owner's testimony may be of such

minimal probative force to warrant a

judge's refusal even to submit the issue

to the jury. Klapmeir v. Telecheck in-

ternational, Inc., 482 F.2d 247 (8th Cir.

1973); United States v. Nali, 437 F.2d

1177, 1187 (Sth Cir. 1971).

Vv

[26] Finally, Kestenbaum asserts that

it is no longer necessary in a Private

antitrust action to prove “public injury”

(injury to competition) as @ prerequisite

to recovery under a general combination

and conspiracy in restraint of trade com-

9 Under Rule 43(a) Fed RCivP..

which provides that a federal court

must judge the competency of a wit-

ness by the federa! statute, tederal rule

or state rule of the forum state de-

pending on which favors the reception

of the evidence, a federal district court

sitting in Texas must apply the majority

rule since it is the rule in Texas. F. g.

National Surety Corp. v. Seale, 499

S.W.2d 753 (Tex.Civ.App.1973) (The

testimony of the owner that he knows

the value of the property is sufficient,

at least prima facie, to qualify him to

give an opinion.“); Graves v Trevino,

386 SW2d 831, ref. g. „ e

(Tex.Civ.App.1965); Fiuitt v. Valley

Stockyards Co., 384 $.W.2d 917, ref n.

r. e. (Tex.Civ.App.1964). More Partic-

FFF PK, Saas BGA S45 t

plaint. To the extent he asserts that a

plaintiff in a private antitrust action

need only show that the restraint tends

or is reasonably caiculated to prejudice

the public interest, Kestenbaum is cor-

rect. Such a plaintiff is not required to

shoulder the more onerous burden of

proving specific economic injury to com-

petition. In Rogers v. Douglas Tobacco

Bd. of Trade, inc., 266 F.2d 636, 644

(Sth Cir. 1959), we stated: “That does

not mean that specific public injury

must be proved before a private person

can recover; but before it can be said

that the conduct is forbidden as unrea-

sonably restraining trade or commerce

within the meaning of the Sherman

Antitrust Act it must appear that it

tends or is reasonably calculated to

Prejudice the public interest. (Emphasis

in original.) Accord, Schaffer v. Universal

Rundle Corp., 397 F.2d 893, 897 (5th

Cir. 1968), Cherokee Laboratories, Inc.

v. Rotary Drilling Services, Inc., 383

F.2d 97, 104 (5th Cir. 1967), Lamb

Enterprises, Inc. v. Toledo Blade Co.,

461 F.2d 506 (6th Cir. 1973).

127] Kestenbaum presses his theory

beyond this, to the point of asserting

that to recover under a restraint of

trade claim a plaintiff need only show a

violation of the antitrust laws and dam-

age to himself. With this we cannot

agree. Kestenbaum founds this broad

contention upon the Supreme Court's

holdings in Radovich v. National Foot-

bali League, 352 U.S.445, 77S Ct. 390, 1

ularly, that such testimony is admissible

in Texas on the issue of good will would

appear beyond question in light of the

holding in Scott v. Doggett, 286 8 ,. 20

183, ref. . 7. e. (Tex. CW. App 1950),

that the rule for measuring Gamages to

good wil! is the same as that for measur-

ing damages to any other property.

10. The Advisory Committee on Federal

Rules of Evidence has construed Rule

702 (Testimony by Experts) to include

“not only experts in the strictest sense

of the word, e g. physicians, physicists,

and architects, but also the large group

sometimes called “skilled” witnesses,

such as bankers or landowners testifying

to land values.”

r Nen

8D Me 28S spend)

Appendix - 10

6037

6038

L.€d.2d 456 (1957) and its progeny.''

The thrust of these decisions is most

succinctly stated in Radiant Burners,

inc. v. Peoples Gas Light & Coke Co,

364 US. 656, 660, 81 S.Ct. 365, 367,

5 L.Ed.2d 358 (1961):

By « 1, Congress has made illegal:

“Every contract, combination

or conspiracy, in restraint of trade or

commerce among the several States

* *. Standard Oil Co. of New

Jersey v. United States, 221 U.S. 1, 31

S.Ct. 502, 515, 55 L.Ed. 619.

Congress having thus prescribed the

criteria — the prohibitions, the courts

may not expand them. Therefore, to

state a claim upon which relief can be

granted under that section, allegations

adequate to show a violation and, in a

Private treble damage action, that

plaintiff was damaged thereby are all

the law requires.

An analysis of the facts in these cases

demonstrates that the requirement that

no more than individual injury be shown

has been apphed only in private anti-

trust actions alleging per se violations or

actions based upon restraint of trade and

monopolization. Our conciusion that

the rule is not universal «ss buttressed by

the Court's more recent deci-

sion in Continental Ore Co. v. Union

Carbide & Carbon Corp., 370 U.S. 690,

11. re McConnell, 370 U.S. 230, 231,

82 S.Ct. 1288, 1290, 8 L.Ed.2d 434

11962), Poller v. Columbia Broad-

cashing System, 368 US. 464, 473.

82 S.Ct. 486, 491, 7 L.Ed2d 458

(1962); Radiant Burners, inc. v. Peoples

KESTENBAUM v. FALSTAFF BREWING CORPORATION

708, 82 S.Ct. 1404, 1415, 8 L.Ed.2d

777 (1962), where, after finding that all

Practices complained of were per se

violations, the court held that the trial

court's “public injury” charge was

erroneous. See Arthur Murray, Inc.

v. Reserve Plan, inc., 406 F.2d 1138,

1145 (8th Cir. 1969). Also supportive

is the Sixth Circuit's holding in Lamb

Enterprises, Inc., supra at 517, that

where there is no per se violation it

must be determined whether the activity

complained of unreasonably restrains

trade, „ e., 1s reasonably calculated to

Prejudice the public interest. But see

Syracuse Broadcasting Corp. v. New-

i 295 F 2d 269. 276-77 (2nd Cir.

1

Today's resolution of the public

injury issue accords with our prior

holding in Harrison v. Prather, 435

F.2d 1168, 1176 (Sth Cir. 1970).

There, faced with plaintiff Harrison's

Private conspiracy in restraint of trade

claim, we stated that:

“the proposition that recover is possible

tf an individual proves purely persona!

damages, does not establish the neces-

sary element of restraint of commerce.

Harrison's authorities consist entirely of

per se violations cases or cases involving

activities which by their nature and

character had a monopolistic tendency.”

Reversed and remanded.

Gas Light and Coke Co., 364 US. 656,

660, 81 S.Ct. 365, 367, 5 L. Ed. 2d 358

(1961); Klors, inc. v. Broadway-

Hale Stores, inc., 359 U.S. 207, 211,

79 S.Ct. 705, 709, 3 L.Ed.2d 741

1959)

Adm. Office, U.S. Courts — West Publishing Company, Saint Paul, Minn

ww. AGERE PRIOR

—

CORRECTED

KESTENBAUM v. FALSTAFF BREWING CORPORATION

Dana 1. KESTENBAUM,

Plaintiff-Appeliee,

FALSTAFF BREWING

CORPORATION,

Detendant-Appeliant.

No. 74-1878.

United States Court of Appeals,

Fifth Circuit.

June 16, 1975.

Wholesale distributor brought civil

antitrust suit against brewery and 81

leged that brewery violated Sherman

Act by price-fixing, by employing terri-

torial restrictions on resale of beer, by

Participation in a general combination

and conspiracy in restraint of trade, and

by placing restraints on distributor's sale

of the distributorship. The United

States District Court for the Western

District of Texas, at Waco, Jack Roberts,

J., entered judgment in favor of distrib-

utor, and brewery appealed. The Court

of Appeals, Clark, Circuit Judge, heid

that distributor failed to prove an injury

to his business resulting from brewery's

asserted price-fixing actions and thus is-

sue of price fixing should not have been

submitted to jury, that jury should not

have been instructed that brewery would

be guilty of a per se violation of anti-

trust laws if jury found that brewery

dictated sale price of distributorship, and

that the trial court erred in submitting

to jury the issue of whether brewery

was guilty of restraining sales to cus-

tomers outside distributor's prescribed

geographical area.

Reversed and remanded.

1. Monopolies—28(7.1, 7.2)

in order to recover treble damages

under Clayton Act, plaintiff must prove

@ violation of the antitrust laws by the

defendants, an injury to his business re-

sulting from the defendants’ wrongful

actions, and some indication of the

amount of the damage done. Clayton

Act,s 4.15 U.S. C. A. 5 15.

2. Monopolies—17(1.3)

Brewery’s policy of automaticaliy

raising its selling price to wholesale dis-

tributor by one-half of amount of any

Price increase imposed by distributor in

adherence to brewery’s “stay competi-

tive” requirement might be classified as

Appendix - 11

arbitrary, but such increase was not it-

self violative of antitrust laws, and did

not afford a basis for proof of injury

even though it was coupled with a price

ceiling requirement which was a per se

violation. Clayton Act, s 4,15 U.S. C. A.

§ 15; Sherman Anti-Trust Act, s 1, 15

U.S. C. A. 3 1.

3. Monopolies—28(7.2)

A prerequisite to wholesale distribu-

tor’s recovery for brewery’s allegedly

wrongful price-fixing activity was 3

showing that the price ceiling on sales

by distributor, disregarding the price

charged to him, caused injury. Clayton

Act, 1 4, 15 U.S. C. A. s 15; Sherman

Anti-Trust Act, s 1, 15 U.S. C. A. 6 1.

4. Monopolies—28(8)

Where wholesale distributor failed

to offer any competent evidence to es-

tablish that brewery’s allegedly wrongful

Price-fixing activity produced injury to

him, no jury issue existed. Clayton Act,

8 4, 15 U.S. C. A. & 15; Sherman Anti-

Trust Act, s 1,15 U.S.C.A. 5 1.

5. Monopolies—28(7.5, 7.6)

Even if wholesale distributor had

not admitted that brewery’s “stay com-

petitive’ policy was logical and proper,

and had proffered evidence indicating

that requiring him to meet prices of oth-

er similar products caused him injury,

distributor's price-fixing claim was defi-

cient and did not furnish basis for recov-

ery of treble damages, where brewery

did not violate any antitrust stricture by

raising its price to its wholesalers, and

distributor's only proof of extent of inju-

ry was calculation of sum of brewery’s

increased selling price to him. Clayton

Act, 94, 15 U.S. C. A. 5 15; Sherman

Anti-Trust Act, s 1, 15 U.S. C. a. 6 1.

6. Monopolies—28(7.6)

Leniency should be permitted in

showing damages in private antitrust ac-

tions, but @ damage assessment based

wholly on speculation and guesswork is

improper. Clayton Act, s 4,15 U.S. C. A.

1 15.

7. Monopolies—28(7.2)

In light of admission of wholesale

distributor, who attacked brewery’s price

Promotions in which he sold beer at a

discount as a type of price-fixing, that

he would have participated in some such

Promotions voluntarily as @ matter of

sound business practice, it was incum-

bent upon distributor to reveal what pro-

Synopees, Syllabi and Key Number Classification

COPYRIGHT © 1975, by WEST PUBLISHING CO.

The Synopses, Syllabi and Key Number Classifi-

cation constitute no part of the opinion of the court.

f.

PP

INDEXED

FP

Appendix - 12

Ta

ll

il F

Hitt

ui 15

brewery s price promotions in which he

sold beer at a discount as a type of

price-fixing scheme, did not have a right

to recover ali costs incurred in price-fix-

ing promotions regardiess of whether he

was compelled to participate, or partici-

pated voluntarily. Clayton Act, s 4, 15

U.S.C.A. 6 15; Sherman Anti-Trust Act,

1. 15 U.S. C. A. 51.

9. Monopolies—28(7.1)

Even if brewery dictated sale price

of distributorship franchise, brewery

would not be guilty of a per se violation

of antitrust laws. Clayton Act, s 4, 15

U.S. C. A. s 15: Sherman Anti-Trust Act,

$ 1,15 U.S. C. A. 3 1

10. Monopolies-17(2.3)

Any restraint on sale price of di-

tributorship franchise legitimately im-

posed by brewery to safeguard distribu-

tion-rights privilege did not have such a

deleterious impact as to create antitrust

iMegality as a matter of law, and rather

necessitated an inquiry into the business

Purpose and reasonableness of the re-

straint employed, and should be meas-

ured under rule of reason standard.

Clayton Act, s 4, 15 U.S. C. A. 5 15;

Sherman Anti-Trust Act, s 1, 15

USCA. 31.

11. Monopolies—17(2.1)

Brewery could legitimately restrict

class of persons with whom it would

agree to continue a distributorship fran-

chise, so long as such restriction was not

artifically employed to further some un-

lawful practice. Clayton Act, s 4, 15

US. C. A. s 15; Sherman Anti-Trust Act,

s1,1SUSCA. 3 1.

12. Monopolies—17(2.1)

A refusal to deal becomes illegal un

Se eee only when it produces

unreasonable restraint of trade.

Sherman Anti-Trust Act, s 1, 15 US.

A. 31.

KESTENBAUM v. FALSTAFF BREWING CORPORATION

13. Monopolies—17(2.3)

Brewery had a right to restrict sales

price of one of its distributorship fran-

chises to the reasonable value of that

franchise in order to insure that the pur-

chaser would have a chance to realize a

reasonable return on its investment.

eg Anti-Trust gy s 1,15 US.

A.s1

14. Monopolies- 17(2.3)

Test of antitrust legality of brew-

ery's restraint, if any, on sale price of

one of its distributorship franchises was

whether the effect upon competition in

market place was substantially adverse.

Sherman Anti-Trust Act, s 1, 15 U.S.

CA.s1

15. Monopolies—12(1.10)

Only those acts, contracts or agree-

ments which unduly obstruct the due

course of trade, or which injuriously re-

strain trade because of their inherent na-

ture or effect, or because of their evi-

dent purpose are unlawful under rule of

reason. Sherman Anti-Trust Act, s 1,15

U.S.C.A. 51

16. Monopolies—28(8)

Jury should not have been permitted

to consider issue of whether brewery

was guilty of restraining sales to cus-

tomers outside wholesale distributor's

Prescribed geographical area, in absence

of any proof of extent of damage to

distributor's business proximately caused

by such customer restraint. Clayton

Act, s 4, 15 U.S. C. A. s 15; Sherman

Anti-Trust Act, s 1,15 USCA. 5 1.

17. Monopolies—28(7.2)

Wholesale distributor, who sought to

recover trebie damages on basis of brew-

ery’s alleged violation of Sherman Act

by employing territorial restrictions on

resale of beer, was required to proffer

evidence which would provide a reasona-

ble basis for estimating the extent of

injury caused by such a territorial re-

striction. Clayton Act, s 4, 15 U.S.C.A.

s 15; Sherman Anti-Trust Act, s 1, 15

USCA. 5 1.

18. Damages—6

Where wrong is of such a nature as

to preclude exact ascertainment of

amount of damages, plaintiff may recov-

er upon a showing of the extent of the

damages as a matter of just and reason-

able inference, although the result may

be only an approximation.

Appendix - 13

KESTENBAUM v. FALSTAFF BREWING CORPORATION

19. Damages—6

Wrongdoer may not complain of

inexactness where his actions preciude

precise computation of the extent of the

injury.

20. Damages—6

An award may not be based solely

upon speculation or guesswork.

21. Monopolies—28(9)

Specific elements to be considered in

calculating good will! value of a busi-

ness in a civil antitrust suit are the

amount of profits the business has made

over and above an amount fairly attrib-

utable to return on capital investment

and to labor of owner, and whether

there is a reasonable prospect that this

additional profit will continue into fu-

ture, considering all circumstances exist-

ing and known as of date of the valua-

tion. Clayton Act, s 4,15U.S.C.A. 5 15.

22. Evidence—474(16)

Wholesale distributor's estimation of

“good will!“ value of his business would

be admissible in civil antitrust suit.

Clayton Act, s 4, 15 U.S. C. A. 6 15; Fed-

eral Rules of Evidence, rule 702, 28 US.

CA.

23. Federal Civil Procedure—1194

An owner is competent to give his

opinion on velue of his property. Feder-

al Rules of Evidence, rule 702, 28 US.

C.A.

24. Federal Civil Procedure—1194

An owner's opinion on value of his

Property is subject to attack through

cross-xamination or independent evi-

dence refuting the owner's estimate,

with jury as fact finder shouldering the

responsibility of judging the credibility

of the witness, resolving the conflicting

evidence, and assessing the weight of

opinion testimony. Federal Rules of Ev-

idence, rule 702, 28 U.S.C.A.

2. Federal Civil Procedure—1211

Where owner bases his estimation of

value of his property solely on specula-

tive factors, owner's testimony may be

of such minimal probative force to war-

rant a judge's refusal even to submit the

issue to jury. Federal Rules of Evi-

dence, rule 702, 28 U.S. C. A.

26. Monopolies—28 (7.2)

A plaintiff in a private antitrust ac-

tion need only show that restraint of

trade tends or is reasonably calculated to

25

— POETICS RE |

es

Prejudice the public interest, and is not

required to shoulder the more onerous

burden of proving specific economic inju-

ry to competition. Clayton Act, s 4, 15

U.S. C. A. 8 15; Sherman Anti-Trust Act,

s 1,158 U.S. C. A. 5 1.

27. Monopolies—28(7.6)

Mere showing of violation of anti-

trust laws and individual damage, and

not of public injury, is insufficient to

permit recovery under a private re-

straint of trade claim. Clayton Act, s 4,

15 U.S.C.A. 3 15; Sherman Anti-Trust

Act, 6 1,15 U.S. C. A. 5 1.

Appeal from the United States Dis-

trict Court for the Western District of

Texas.

Before GOLDBERG, CLARK and

GEE, Circuit Judges:

CLARK, Circuit Judge:

This is an appeal by the defendant,

Falstaff Brewing Corporation, from a

jury verdict in favor of the plaintiff,

Dana |. Kestenbaum, in a civil antitrust

suit brought under Section 4 of the Clay-

ton Act, 15 U.S.C. 3 15, to recover dam -

ages to Kestenbaum's business as a

wholesale distributor of Falstaff Beer.

The Kestenbaum distributorship was

begun in 1934 by Dana Kestenbeum’s

father, Sam Kestenbaum, and originally

encompassed within its area of primary

responsibility Milam, Robertson, Burile-

son, Brazos, Falls and Bell counties, Tex-

as. Prior to the years at issue in this

controversy, Bell and Falis counties were

transferred to other distributorships.

Dana Kestenbaum became an active

Partner in the distributorship in 1950.

He was in complete control from 1967

until he sold the distributorship in 1971,

allegedly because he could no longer fi-

nancially endure Faistaff's anticompeti-

tive practices. Actually, Kestenbaum

sold the distributorship territory in three

separate transactions, again allegedly

under duress, with Milam county

going to Falstaff’s Taylor, Texas distribu-

tor, Robertson county to Falstaff's Mar-

lin, Texas distributor, and Burleson and

Brazos counties to Kestenbaum’s former

manager.

At trial Kestenbaum asserted Falstaff

had violated Section 1 of the Sherman

Act, 15 U.S.C. 6 1. More particularly, he

charged them with: (1) price fixing, 12

employing territorial restrictions on the

r AED LF RYE PENT EP

r

Appendix - 14

6029

6030

6031

resale of Falstaff beer, (3) participation

in a general combination and conspiracy

in restraint of trade, and (4) ae

—— on bis sale the

istributorship. From a jury — of

86,877.00 dollars, trebied by the trial

court to 181,551.00 dollars, Falstaff has

perfected this appeal.

in this court, Falstaff excepts to the

trial court’s charge, challenges the suffi-

ciency of the proof of damage and ques-

tions the method employed to measure

damages. The record does establish er-

ror in regard to some of Kestenbaum’‘s

contentions. The trial court having cho-

sen not to utilize the special verdict pro-

cedure of Fed. R. Civ. P. 49(a), which

would have revealed the jury’s resolution

of the rious theories of liability ad-

vanced,” we are left with no alternative

but to reverse and remand the entire

proceeding.

{1} In Terre v. Household Goods

Carriers’ Bureau, 494 F.2d 16, 20, (5

Cir.) rehearing en banc denied, 496 F 20

878 (5 Cir.) cert. dismissed, —U.S.—, 95

S.Ct. 246, 42 L.Ed.2d 260 (1974), we

stated: in order to recover treble dam-

ages under Section 4 of the Clayton Act,

(plaintiff must] prove a violation of the

antitrust laws by the defendants, an in-

1. Kestenbaum charges that Falstaff,

through its franchise agreement with

him and its superior economic position:

(1) imposed territorial restrictions by

denying him the right to sell to retail

establishments outside hic four-county

franchise area; (b] fixed the prices at

which he sold beer to retail accounts

and arbitrarily raised its price to him

by one-half of all wholesale price

increases he instituted pursuant to its

directives; (c) periodically required him

to participate in price promotions by

directing that he sell at a specified dis-

count off regular price and stand one-

half of the loss resulting from the dis-

counted price; d] required him to

maintain unnecessary warehouse

facilities in Caldwell and Cameron,

Texas in furtherance of its market

allocation policy; (e] required him to

Participate in unneccessary ber spending

and advertising promotions; (f) made

unwarranted criticisms and threats of

termination if he did not follow its

directives; and (g) required that he sell

his distributorship at a price set by

Falstaff.

*

7nR—— ET

ETL MONI LENG o OLE ELE LEED

KESTENBAUM v. FALSTAFF BREWING CORPORATION

jury to his business resulting from the

defendants’ wrongful actions, and some

indication of the amount of the damage

done.” See Hobart Bros. Co. v. Maicoim

T. Gilliland, loc., 471 F.2d 894, 901-902

(Sth Cir.), cert. denied, 412 U.S. 923, 93

S. Ct. 2736, 37 L.Ed.2d 150 (1973); Shaw

v. Mobile Oil Corp., 60 F.R.D. 566, 568

(D.N.H.1973). Kestenbaum failed the

second of this three-pronged test, / e., he

failed to prove an injury to his business

resulting from the defendants’ asserted

price-fixing actions. Thus, the trial

court erred in submitting the issue of

price fixing to the jury.

According to Kestenbaum’s testimony,

at all times while he was a distributor

Falstaff fixed the prices at which he soid

beer to retail accounts. Until about

1966, this price fixing allegediy consisted

of instructions to distributors directing

that predetermined nice be instituted

at specified times. During the period

from 1966 until 1971 when Kestenbaum

sold his distributorship, Falstaff alleged-

ly indirectly controlled his prices by in-

structing him to stay competitive with

other local or “popular” brands.” With

this directive to remain competitive, Fal-

staff instituted a policy of automatically

raising its selling price to Kestenbaum

by one-half of the amount of any price

increase imposed by him in adherence to

Falstaff’s “stay competitive require-

2. See Brown, Federal Special Ver-

dicts: The Doubt Eliminator, 44 F.R.D.

245 at 338 (1967); Ford Motor Co. v.

Dalias Power & Light Co., 499 F.2d

400, 412 n. 19 (5th Cir. 1974); Sim-

mons v. King, 478 F.2d 857, 862 n. 12

(5th Cir. 1973); Boyce v. Pi Kappa

Alpha Holding Corp., 476 F.2d 447,

453 (5th Cir. 1973) (Brown, C. J.,

concurring); Wolfe v. Virusky, 470 F. 20

831, 837 (Sth Cir. 1972) (Brown, C. J.,

concurring); Burns v. Anchor-Wate Co.,

469 F.2d 730, 734 n. 8 (5th Cir.

1972); In re Double D. Dredging Co.,

Inc., 467 F.2d 468, 469 n. 3 (5th Cir.

1972); Little v. Bankers Life & Cas.

Co., 426 F.2d 509, 512 (Sth Cir. 1970)

(Brown, C. J., concurring); Home v.

Georgia Southern & Florida Ry. Co.,

421 F.2d 975, 980 (5th Cir. 1970)

(Brown, C. J., concurring).

3. S. g., Pearl, Lone Star and Jax.

Other brands, such as Schlitz and

Budweiser, were designated premium“

beers and sold at a slightly higher price

than popular beers.

ee e

rde ee

i — armee.

Appendix - 15

KESTENBAUM v. FALSTAFF BREWING CORPORATION 6031

6032

ment. Kestenbaum claimed that this

latter price-fixing scheme damaged him

in the one-half increase amounts Fal-

staff was assessing him under its auto-

matic price increase policy. He admitted

at trial however, that he would have re-

mained competitive in the absence of

any coercion by Falstaff. The evidence

further disclosed that several other Fal-

staff distributors who attempted to go

higher than the popular price level were

met with drastic reductions in sales.

124] Kestenbaum submits that ai-

though it is true that he would have

stayed competitive with popular brands

even without a directive from Falstaff,

when Falstaff's requirement that he do

so was coupled with its taking of one-

half of ali additional revenue from his

price increases on retail accounts, a situ-

ation was created in which he was not

free to realize the percentage of profit

that could have been attained absent this

requirement. To reason that the amount

of this diminished profit established any

measure of antitrust damage is a non

sequitur in today’s case. While Fel-

staff 's increase in price to Kestenbaum

may be classified as arbitrary, such in-

crease is not itself violative of the anti-

trust laws, nor does it afford a basis for

proof of injury even though it is coupled

with a price ceiling requirement which is

s per se violation. A prerequisite to

Kestenbaum's recovery on this issue was

a showing that the price ceiling on sales

by him, disregarding the price charged

to him, caused injury. Not only did he

fail to prove this, he established that the

wholesale price which Falstaff allegedly

fixed was a proper price. While the fact

of injury often involves evidentiary

questions which are properly for the jury

le. g., Storey Parchment Co. v. Paterson

Parchment Paper Co., 282 U.S. 555, 562,

51 S.Ct. 248, 250, 75 L.Ed. 544, 548

(1931)], no jury issue exists where, as

here, the plaintiff fails to offer any com-

petent evidence to establish that the de-

fendant’s wrongful price-fixing activity

produced injury to him.

[5,6] Even if Kestenbaum had not

admitted that the “stay competitive”

policy was logical and proper, and had

proffered evidence indicating that re-

quiring him to meet the prices of other

similar products caused him injury. this

claim still would be deficient for fauure

to meet Terres third requirement—

that the proof give some indication of

the extent of the injury. Kestenbaum

LOLI OOO Big BE IEE LE) OEY

SELLE

claims his damages were 25,000 dollars,

the sum of Falstaff's increased selling

price to him, based upon one-half of al!

of his increases to retailers. Under the

facts shown in this case, Falstaff did not

violate any antitrust stricture by raising

its price to its wholesalers. Kestenbaum,

therefore, by introducing only the 25,000

dollar calculation to support his claim for

for wholesale price fixing, has

failed to offer any competent evidence

on the amount of damage. We recog-

nize that leniency should be permitted in

showing damages in private antitrust ac-

tions, however, a damage assessment

based whoily on 2 and guess-

work is improper. Bigelow v.

RKO Pictures, 327 U. 4 281. 264-65, 66

S.Ct. 574, 579-80, 90 L.Ed. 652 (1946).

Because proper proof of injury and of

damage was missing, the district judge

should have directed a verdict for de-

fendant on this aspect of plaintiff's

price-fixing claim. it the jury calculated

any part of its damage award on the

sum of Falstaff’s price increases to Kes-

tenbaum, it was error. Under the enig-

matic general verdict we connot know

whether they did or not, so the verdict

cannot stand.

{7] Plaintiff also attacks Falstaff’s

price promotions, in which he sold Fal-

staff beer at a discount, as a type of

price-fixing scheme. Again plaintiff has

failed to meet his burden of establishing

@ net economic loss. Having admitted

that he would have participated in some

such promotions voluntarily as a matter

of sound business practice, it was incum-

bent upon Kestenbaum to reveal what

proportion of the total costs were attrib-

utable to such voluntary promotions as

well as showing what sales gains and

losses he experienced before and after he

unwillingly followed Falstaff’s require-

ments. Without such proof a jury could

not compute the amount of loss recover-

able on a basis other than mere specula-

tion and guesswork. Bigelow v. RKO

Pictures, supra.

ls! Kestenbaum cites Perma Life

Mufflers, inc, „ International Paris

Corp., 392 U.S. 134, 88 S.Ct. 1981, 20

L. Ed. 2d 982 (1968), as authority for the

proposition that he has the right to re-

cover all costs incurred in price-fixing

promotions regardiess of whether he wes

compelied to participate, or participated

voluntarily. Perma Life will not support

such a broad rule. While the Supreme

Court did hold that an injured party may

.

e eee AAAI

Appendix - 16

‘fat by-products of a restric-

tion inuring to 8 plaintiff's benefit can

was lacking here.

11

[9,10] The trial court erred in in-

structing the jury that if they found

that Falstaff dictated the sale price of

Kestenbaum’'s distributorship, Falstaff

would be guilty of a per se violation of

the antitrust laws.” The per se rule was

judicially created to deter agreements or

practices constituting unreasonable re-

straints on trade, having such a perni-

cious effect on competition and so lack-

ing in any redeeming virtue that a decla-

ration of illegality could be made with-

out elaborate inquiry into the precise

harm they cause or the business excuse

for their use. E. g., United States v.

Topco Associates, inc., 405 US. 596,

607, 92 S.Ct. 1126, 1133, 31 L.Ed.2d

515 (1972); White Motor Co. v. United

States, 372 U.S. 253, 262, 83 S.Ct. 696,

701, 9 L.Ed.2d 738 (1963); Northern Pa-

cific R. R. Co. v. United States, 356 U.S.

1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545

(1958). Under the particular facts of the

case sub judice, where the price fixer

must extend the very distribution-rights

Privilege which gave Kestenbaum’s busi-

ness its value, any restraint legitimately

imposed to safeguard that privilege does

not have such a deleterious impact as to

create illegality as a matter of law.

Rather, this type of situation necessi-

tates an inquiry into the business pur-

pose and reasonableness of the restraint

employed, and must be measured under

4. We would also note that Perma Life

expressly pretermitted deciding

whether complete involvement in and

voluntary support of a monopolistic

scheme might bar an antitrust cause of

action. Our conclusion that Perma L ife

was not intended to completely exclude

the element of voluntariness as a de-

fence to an antitrust claim accords with

decisions from other circuits. Premier

Electrical Constr. Co. v Miller-Davis

Co., 422 F.2d 1132, 1138 (7th Cir.

1970), interpreted Perma Life to hold

that only those plaintiffs ‘who do not

bear equal responsibility for creating

KESTENBAUM v. FALSTAFF BREWING CORPORATION

the rule of reason standard.

111,121 it is beyond question, and the

trail judge correctly so charged, that

Falstaff may legitimately restrict the

class of persons with whom it would

agree to continue a Falstaff franchise, so

long as such restriction was not artifi-

cially employed to further some unlawful

practice. E. g., United States v. Arnold

Schwinn & Co., 388 U.S. 365, 376, 87

S.Ct. 1856, 1864, 18 L.Ed.2d 1249

(1967); United States v. Colgate & Co.,

250 U.S. 300, 307, 39 S.Ct. 465, 468, 63

L.Ed. 992 (1919). A refusal to deal be-

comes illegal under the Sherman Act only

when it produces an unreasonabie re-

straint of trade. E.g., United States v.

Park, Davis & Co., U.S. 29, 45-46, 80

S.Ct. 503, 512-13, 4 L.Ed.2d 505 (1960);

Lorain Journal Co. v. United States, 342

U.S. 143, 155, 72S.Ct. 181,187, 96 L.Ed.

162 (1951); Kiefer-Stewart Co. v. Joseph

E. Seagram & Sons, 340 U.S. 211, 214,71

S.Ct. 259, 261, 95 L.Ed. 219 (1951).

113] it logically follows that Falstaff

has a right to restrict the sales price of

one of its distributorship franchises to

the reasonable value of that franchise in

order to insure that the purchaser will

have a chance to realize a reasonable

return on his investment. Falstaff

clearly has a strong interest in the finan-

cial vitality of a new franchisee. If the

purchaser of a franchise makes a bad

bargain when he buys, then he cannot

give the distributorship the solid, con-

cerned management which it must have

to be successful for him and to enhance

Falstaff’s image and relative position in

the market.

A franchisor’s limited right to partici-

pate in negotiations of a franchise sale

has previously been recognized by this

court in Frank Coulson, inc.—Buick v.

General Motors Corp., 488 F.2d 202 (5th

and establishing an illegal scheme, or

who are required by economic pressures

to accept such an agreement, should not

be barred from recovery simply be-

couse they are participants. Columbia

Nitrogen Corp. v. Royster Co., 451 F.

3, 15-16 (4th Cir. 1971), citing Perma

Life and Premier Electrical, concluded

that a party who voluntarily formulates

and equally participates in a non-

coercive agreement restraining trade

cannot maintain a s 1 Sherman Act

action against its partner.

5. See note 7 infra.

R

e er ee eee f Nr

Appendix - 17

KESTENBAUM v. FALSTAFF BREWING CORPORATION

Cir. 1974), a tort action to recover for

interference in contractual negotiations.

In Frank Coulson, inc., we held that an

automobile manufacturer possessed a

limited privilege to approve or disap-

prove a prospective purchaser since it

would deal with the purchaser in the

future and he would represent it to the

public. This privilege further extends to

the degree of control over the dealer's

sale price necessary to ensure that the

new dealer starts off financially sound.

Accord, Pierce Ford Sales, inc. v. Ford

Motor Co., 299 F.2d 425, 429 (2nd Cir.),

cert. denied, 371 U.S. 829, 83 S.Ct. 24,9

3d. 20 66 (1962); Martin v. Texaco,

ge F.Supp. 498, 502-504 (S.D.Miss.

[14,15] On retrial, the jury must de-

cide whether Falstaff restrained the sale

price which Kestenbaum could receive,

and, if so, whether such restraint was

adopted for good business reasons and

not to injure competitors. The test of

antitrust legality of such a restraint is

whether the effect upon competition in

the marketplace is substantially adverse.

United States v. Arnold Schwinn & Co.,

supra. Only those acts, contracts or

agreements which unduly obstruct the

due course of trade, or which injuriousiy

restrain trade because of their inherent

nature or effect, or because of their evi-

dent purpose are unlawful under the

rule of reason. F. g., United States v.

American Tobacco Co., 221 U.S. 106, 31

S.Ct. 632, 55 L.Ed. 663 (1910).

{16} The trail court erred in submit-

ting to the jury the issue of whether

Falstaff was guilty of restraining sales

to customers outside Kestenbaum’s pre-

scribed geographical area. It was im-

proper to permit the jury to consider this

aspect of territorial restriction since Kes-

tenbaum failed to offer any proof of the

extent of damage to his business proxi-

mately caused by such customer re-

straint. Kestenbaum’s only proof relat-

ing to this issue was his testimony that

on one occasion he had been reprimanded

by Falstaff for selling to a retailer who

resided outside his four county territory,

6. Kestenbaum testified Falstaff's re-

quirement that he maintain warehouse

facilities in Caldwell, Cameron and

Bryan, rather than just one warehouse in

Bryan as he requested, caused the un-

necessary stockpiling of inventory,

See By DIM any ak he

plus his testimony and that of several

other witnesses that it was Falstaff's

policy to restrict a distributor's sales to

retailers located within the area covered

by his franchise agreement. Kesten-

baum never attempted to show the

amount of monetary injury suffered be-

cause of loss of sales to retailers outside

his territory—sales that reasonably would

have been made but for Falstaff's

territorial restriction policy.

[17] Agair. the rule of Terreil re-

quires evidence which would provide a

reasonable basis for estimating the ex-

tent of injury caused by such a territori-

al restriction. Erroneous inclusion of the

customer restraint element in the court's

charge despite the complete lack of dam-

age proof may have been prejudicial to

Falstaff, since this instruction could have

been misinterpreted by the jury to au-

thorize bn award on Kestenbaum's sepa-

rate claim for unnecessary warehouse

cost. Since both allegations were or-

gued under the general territorial re-

striction claim the jury may well have

mistakenly awerded the amount of such

unnecessary warehouse costs incurred

within the assigned area upon a determi-

nation that Kestenbaum was wrongfully

restrained from seeking customers out-

side of his allotted territory. The gener-

al verdict does not permit us to know

whether this occurred.

While the composition and content of

the charge is for the trial court in the

first instance, we would observe that if

Kestenbaum makes the requisite proof

to entitle him to charge on the imposi-

tion of unwarrented and unnecessary

warehousing and distribution costs the

damages attributable to such costs could

separate instruction on that subject. if

such a charge is cast as a liability damage

unit it would minimize the risk of sow-

ing seeds of confusion between damages

claimed to have arisen from activity re-

quired within the territory assigned (un-

necessary warehouse costs) and activity

proscribed without the territory (solicit-

ing customers in other counties). Be-

cause these two elements have a surface

sameness, care should be taken to pre-

thereby increasing interest, expense, in-

surance, transportation costs, and ex-

Penditures. Kestenbaum assessed his

damages for this alleged violation at

49,115.05 dollars.

Appendix - 18

their truly separate nature. Such

an approach would also minimize the

since we note that plaintiff’s counsel not

only was allowed to argue Falstaff’s al-

leged unnecessary warehouse costs as

damages resulting from territoria! allo-

cation but also pointed to such damages

as caused by a general combination and

conspiracy in restraint of trade.

V

Falstaff asserts that Kestenbaum’s

assessment of the good will val-

ue of his distributorship forms an insuf-

ficient basis to support a jury verdict.

Kestenbaum retorts that his testimony is

supported by the long history of the dis-

tributorship, additional testimony con-

cerning the good will created during the

distributorship’s many years of operation

and documentary evidence of the profits

realized during those years. This sup-

Porting evidence, he contends, is suffi-

cient to establish a reasonable founda-

tion for his opinion on the good will of

the business.’

In light of our decision to remand on

other grounds it is unnecessary for us to

rule on the sufficiency of plaintiff's

proof of damage from a restriction on

distributorship sale price. However,

since the issue must be relitigated it is

appropriate to speak to the general rules

which govern its proper disposition.

118-20] in a case such as this, where

the wrong is of such a nature as to pre-

clude exact ascertainment of the amount

of damages, plaintiff may recover upon

a showing of the extent of the damages

as a matter of just and reasonable infer-

ence, although the result may be only an

approximation. Story Parchment Co. v.

Paterson Parchment Paper Co., supra

282 US. at 563, 51 S.Ct. at 250. The

wrongdoer may not complain of inexact-

ness where his actions preclude precise

computation of the extent of the injury.

Eastman Kodak Co. v. Southern Photo

Co., 273 U.S. 359, 379, 47 S.Ct. 400, 71

7. Kestenbaum placed the good will

value of his distributorship at 49,000

doliars. Falstaff, on the other

hand. ahd approximated the good will

value at 25,000 dollars. With Falstaff’s

approval, Kestenbaum ultimately sold

the distributorship for a total

consideration of 30,000 dollars

above the value of assets and

sites

KESTENBAUM v. FALSTAFF BREWING CORPORATION

L.Ed. 684 (1927). An award may not be

based, however, solely upon speculation

or guesswork. Bigelow v. RKO Radio

Pictures, Inc., supra 327 U.S. at 267, 66

S.Ct. at 580. See also Terrell v. House-

hold Goods Carriers’ Bureau, supra at

23-24.

[21] The specific elements to be con-

sidered in calculating the good will“

value of a business are: (1) What profit

has the business made over and above an

amount fairly attributable to the return

on the capital investment and to the la-

bor of the owner?; (2) What is the rea-

sonable prospect that this additional

profit will continue into the future, con-

sidering all circumstances existing and

known as of the date of the valuation?”’

Standard Oil Co. v. Moore, 251 F.2d 188,

219 (9th. Cir. 1957), cert. denied, 356 US.

975, 78 S.Ct. 1139, 2 L.Ed.2d 1148

(1958); Simpson v. Union Oil Co., 411

F.2d 897, 909 (9th Cir.) rev'd on other

grounds, 396 U.S. 13, 90 S.Ct. 30, 24

L.Ed.2d 13 (1969); Central Coal and

Coke Co. v. Hartman, 111 F.2d 96, 98-99

(8th Cir. 1901); Vanderveide v. Put and

Call Brokers and Dealers Ass n, 344

F Supp. 118 (S.D.N.Y. 1972).

(22,23] We cannot know whether the

new Federal Rules of Evidence will con-

trol relitigation of this case. See Pream-

ble, Pub.Law 93-595, 88 Stat.1926 (Jan.

2, 1975)." However, whether present ev-

identiary rules or the new Federal Rules

are applied, Kescenbaum’s estimation of

the sum of the above valuation elements

will be admissible since under both an

owner is competent to give his opinion

on the value of his property. This rule,

established by the weight of present au-

thority, le. g., Berkshire Mutual Ins. Co.

v. Moffett, 378 F.2d 1007 (5th Cir.

1967); Lee Shops, inc. v. Schatten-

Cypress Co., 350 F.2d 12 (4th Cir.), cert.

denied, 382 U.S. 980, 86 S.Ct. 552, 15

L.Ed.2d 470 (1965); Hartford Fire ins.

Co. v. Cagle, 249 F.2d 241 (10th Cir.

1957); Lawton v. Strong, 249 F.2d 299,

302 (6th Cir. 1957); Universal Pictures

Co. v. Harold Lloyd Corp., 162 F.2d 354

inventory.

8. The new Federal Rules of Evidence

become effective on July 1, 1975, and

apply to all proceedings then pending,

except to the extent that application

of the rules would not be feasible, or

would work injustice, in which event

former evidentiary principles apply.”

ORE IR

Appendix - 19

KESTENBAUM v. FALSTAFF BREWING CORPORATION

(9th Cir. 1947)°} has now been

codified in Rule 702 of the new Federal

Rules of Evidence. Rule 702 provides:

“a witness qualified as an expert by

knowledge, skill, experience, training, or

education, may testify [to specialized

knowledge} in the form of opinion or

otherwise

124, 25] An owner's opinion on value,

however, is subject to attack through

cross-examination or independent evi-

dence refuting the owner's estimate (Hil-

lin v. Hagler, 286 S.W.2d 661 (Tex.Civ.

App.1956)], with the jury as fact-finder

shouldering the responsibility of judging

the credibility of the witness, resolving

the conflicting evidence, and assessing

the weight of opinion testimony. Ter-

rell, supra at 24; Hobart Brothers Co. v.

Malcolm T. Gilliland, inc., supra at 903.

Under certain circumstances, however,

for instance where the owner bases his

estimation solely on speculative factors,

the owner's testimony may be of such

minimal probative force to warrant a

judge’s refusal even to submit the issue

to the jury. Klapmeir v. Telecheck in-

ternational, Inc., 482 F 2d 247 (8th Cir.

1973); United States v. Nali, 437 F.2d

1177, 1187 (Sth Cir. 1971).

Vv

1261 Finally, Kestenbaum asserts that

it is no longer necessary in a private

antitrust action to prove public injury”

(injury to competition) as a prerequisite

to recovery under a genera! combination

and conspiracy in restraint of trade com-

9 Under Rule 43(a) Fed RCivP.,

which provides that a federal court

must judge the competency of a wit-

ness by the federal statute, federal rule

or state rule of the forum state de-

pending on which favors the reception

of the evidence, a federal district court

sitting in Texas must apply the majority

rule since it is the rule in Texas. E. g.,

National Surety Corp. v. Seale, 499

S.W.2d 753 (Tex.Civ.App.1973) “The

testimony of the owner that he knows

the value of the property is sufficient,

at least prima facie, to qualify him to

give an opinion.“); Graves v. Trevino,

386 SW2d 831, ref. nr. e.

Tex Cw. App. 1965), Fluitt v. Valley

Stockyards Co., 384 S.W.2d 917, ref n.

r. e. [Tex Civ. App. 1964) More partic-

plaint. To the extent he asserts that a

plaintiff in a private antitrust action

need only show that the restraint tends

or is reasonably calculated to prejudice

the public interest, Kestenbaum is cor-

rect. Such a plaintiff is not required to

shoulder the more onerous burden of

proving specific economic injury to com-

petition. in Rogers v. Douglas Tobacco

Bd. of Trade, inc., 266 F.2d 636, 644

(Sth Cir. 1959), we stated: hat does

not mean that specific public injury

must be proved before a private person

can recover; but before it can be said

that the conduct is forbidden as unrea-

sonably restraining trade or commerce

within the meaning of the Sherman

Antitrust Act it must appear that it

tends or is reasonably calculated to

prejudice the public interest. (Emphasis

in original.) Accord, Schaffer v. Universal

Rundle Corp., 397 F.2d 893, 897 (Stn

Cir. 1968), Cherokee Laboratories, Inc.

„ Rotary Drilling Services, inc., 383

F.2d 97, 104 (5th Cir. 1967), Lamb

Enterprises, Inc. v. Toledo Blade Co.,

461 F.2d 506 (6th Cir. 1973).

1271 Kestenbaum presses his theory

beyond this, to the point of asserting

that to recover under a restraint of

trade claim a plaintiff need only show a

violation of the antitrust laws and dem-

age to himself. With this we cannot

agree. Kestenbaum founds this broad

contention upon the Supreme Court's

holdings in Radovich v. Nationa! Foot

bali League, 352 U.S. 445, 77S.Ct. 390, 1

ularly, that such testimony is admissibie

in Texas on the issue of good will would

appear beyond question in light of the

holding in Scott v. Doggett, 266 S.W.2d

182, ref. n. r. e. Tex. CW. app. 1950),

that the rule for measuring damages to

good will is the same as that for measur-

ing damages to any other property.

10. The Advisory Committee on Federal

Rules of Evidence has construed Rule

702 (Testimony by Experts) to include

“not only experts in the strictest sense

of the word, e. g. physicians, physicists,

and architects, but also the large group

sometimes called skilled“ witnesses,

such as bankers or landowners testifying

to land values

a Ae BARGER *

a

Appendix - 20

6037

6038

L.€d.2d 456 (1957) and its progeny.''

The thrust of these decisions is most

succinctly stated in Radiant Burners,

Inc. v. Peoples Gas Light & Coke Co.,

364 US. 656, 660, 81 S.Ct. 365, 367,

5 L.Ed.2d 358 (1961):

By « 1, Congress has made illegal:

“Every contract, combination

or conspiracy, in restraint of trade or

commerce among the several States

, Standard Ou Co. of New

Jersey v. United States, 221 U.S. 1,31

S. Ct. 502, 515, 55 L.Ed. 619.

Congress having thus prescribed the

criteria of the prohibitions, the courts

may not expand them. Therefore, to

state a claim upon which relief can be

granted under that section, allegations

adequate to show a violation and, in a

private treble damage action, that

plaintiff was damaged thereby are al!

the law requires.

An analysis of the facts in these cases

demonstrates that the requirement that

No More than individual injury be shown

has been applied only in private anti-

trust actions alleging per se violations or

actions based upon restraint of trade and

monopolization. Our conclusion that

the rule is not universal is buttressed by

the Supreme Court's more recent deci-

sion in Continental Ore Co. v. Union

Carbide & Carbon Corp., 370 U.S. 690,

11.1n re McConnell, 370 U.S. 230, 231,

82 S.Ct. 1288, 1290, 8 L.Ed.2d 434

(1962). Poller „ Columbia Broad-

cashing System, 368 US. 464, 473,

82 S.Ct. 486, 491, 7 L.Ed2d 458

(1962); Radiant Burners, Inc. v. Peoples

Adm Office, US Courts -

KESTENBAUM v. FALSTAFF BREWING CORPORATION

708, 82 S.Ct. 1404, 1415, 8 L.Ed.2d

777 (1962), where, after finding that all

Practices complained of were per se

violations, the court held that the trial

court's “public injury“ charge was

erroneous. See Arthur Murray, Inc.

v. Reserve Pian, loc., 406 F.2d 1138,

1145 (8th Cir. 1969). Also supportive

ts the Sixth Circuit's holding in Lamb

Enterprises, inc., supra at 517, that

where there is no per se violation it

must be determined whether the activity

complained of unreasonably restrains

trade, / e., is reasonably calculated to

prejudice the public interest. Sot see

Syracuse Broadcasting Corp. v. New-

house, 295 F.2d 269, 276-77 (2nd Cir

1961).

Today's resolution of the public

injury issue accords with our prior

holding in Harrison v. Prather, 435

F.2d 1168, 1176 (Sth Cir. 1970).

There, faced with plaintiff Harrison's

Private conspiracy in restraint of trade

claim, we stated that:

“the proposition that recover is possible

'f an individual proves purely personal

damages, does not establish the neces-

sary element of restraint of commerce.

Harrison's authorities consist entirely of

per se violations cases or cases involving

activities which by their nature and

character had a monopolistic tendency.”

Reversed and remanded.

Gas Light and Coke Co., 364 U.S. 656,

660, 81 S.Ct. 365, 367, 5 L.Ed.2d 358

(1961); Klors, Inc. v. Broadway-

Hale Stores, loc., 359 U.S. 207, 211,

79 S.Ct. 705, 709, 3 L.Ed.2d 741

(1959).

West Publishing Company, Saint Paul, Minn

APPENDIX - 21

United States Court of Appeals

FOR THE FIFTH CIRCUIT

October Term, 1974

No. 74-1878

D. C. Docket No. CA-W-72-CA-17

DANA |. KESTENBAUM,

Plaintiff-Appellee,

versus

FALSTAFF BREWING CORPORATION

Defendant-Appellant.

Appeal from the United States District Court for the

Western District of Texas

Before GOLDBERG, CLARK and GEE, Circuit Judges,

JUDGMENT

This cause came on to be heard on the transcript of the

record from the United States District Court for the Western

District of Texas, and was argued by counsel;

ON CONSIDERATION WHEREOF, It is now here ordered

and adjudged by this Court that the judgment of the said District

Court in this cause be, and the same is hereby, reversed; and that

this cause be, and the same is hereby remanded to the said

District Court in accordance with the opinion of this Court:

t is further ordered that plaintiff-appellee pay to defendant-

appellant, the costs on appeal to be taxed by the Clerk ot this

Court.

June 16, 1975

Issued as Mandate:

CC

Fie an

Appendix - 22

186 KESTENBAUM v. FALSTAFF BREWING CORPORATION

Dana |. KESTENBAUM,

Plaintiff-Appetice,

FALSTAFF BREWING

CORPORATION,

Detendant- Appellant.

No. 74-1878.

United States, Court of Appeals,

Fifth Circuit.

Oct. 15, 1975.

Appeal from the United States Dis-

trict Court for the Western District of

Texas; Jack Roberts, Judge.

ON PETITION FOR REHEARING

AND PETITION FOR REHEAR-

ING EN BANC

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

Before GOLDBERG, CLARK and

GEE, Circuit Judges:

PER CURIAM:

The next to last sentence of the para-

graph set out under headnote 7, 514

F.2d at 695, is deleted and the follow-

ing sentence is substituted therefor:

Having admitted that he would have

Participated in some such promotions

voluntarily as a matter of sound busi-

ness practice, it was incumbent upon

Kestenbaum to reveal what proportion

of the total costs were attributable to

such voluntary promotions.

in all other respects the petition for

rehearing is DENIED.

No member of this panel nor judge in

regular active service on the court hav-

ing requested that the court be polled on

rehearing en banc, (Rule 35 Federal

Rules of Appellate Procedure; Local

Fifth Circuit Rule 12) the petition for

rehearing en banc in denied.

Adm. Office, U.S. Courts — West Publishing Company, Saint Paul, Minn.