Bernard Susser v. Carvel Corporation, Carvel Dari-Freeze Stores, Inc., Carvel Stores Realty Corporation, and Eight Other Cases

505 grоund. coverage on another its denial of Apparently is no Arkansas case there however, satisfied, point. We law, in Arkan if it exists this rule It all, Peacock. available to is not sas estoppel. This on waiver bottomed It in Arkansas. matter affirmative ordinarily pleaded bur must Cap Peacock. Aclin den as to it is on v. 141, 718, lener, 144 318 S.W.2d 229 Ark. 989, (1958); Rommel, 233 Ark. Moore v. 190, (1961); James 350 193 S.W.2d Corp., Talcott, Inc. Associates Discount v. (8 1962); 443, Mis 302 F.2d 446 Cir. 275, Bartlett, F.2d souri Pac. R. R. v. 79 1935), (8 denied 296 279 Cir. cert. 142, 620, Here L.Ed. 440. S.Ct. pleaded Peacock neither nor raised argument Fur before the trial court. thermore, estoppel may not be waiver or coverage invoked in to extend Arkansas point to a none where existed before. Montgomery v. Ins. Mutual M.F.A. 357, (8 1957); 250 F.2d Cir. Stand Roberts, ard Acc. F.2d Ins. v. Co. 1942); (8 798-99 Cir. Bankers Nat. Hembey, Ins. Co. v. 217 Ark. S.W.2d

Affirmed. al.,

Bernard et SUSSER Plaintiffs- Appellants, CORPORATION,

CARVEL Dari- Stores, Inc., Freeze Real Stores ty Corporation, al., Defendants-Ap et pellees, Eight And Other Cases. Appeals

United States Court of Second Circuit.

Argued Oct. 1963. 8,May

Decided

5Q7 corporation Corporation, York a 'New dairy primarily manufactures subsidiary products, its cream soft ice organizations, of its individual cеrtain attorneys, and a number officers suppliers. plaintiffs, former operators present of Carvel individual Massachusetts, Con- outlets charged Pennsylvania, also necticut with fraudulent defendants the Carvel misrepresentations in franchise ne- gotiations. separate trial of fraud After charges Judge sitting Dawson, without jury, complaints as to dismissed the charges February 7, on 1962. The these City Rothstein, Sidney New York W. liability on the antitrust causes issue Greenfield, Klein, Rothstein (Joseph L. separately of action was tried Judge before brief), City, Klein, York New & jury. The Dawson without a Susser, plaintiffs-appellants Bernard for plaintiffs alleged had unlaw- that Carvel al. et fully prices prod- fixed of the retail City Weisman, York L. New and Herman ucts sold at the franchise stores Roth, Amen, agreements (Herbert & Weisman F. that the franchise tying embodied City, brief), dealing arrangements Butler, for New York on the and exclusive Carvel, Clayton defendants-appellees al. et of the Sherman and violative charged complaints also acts. The City, Mulligan, York G. New William ‍‌‌​​​‌​​‌‌‌‌‌‌‌​‌​​​‌‌‌​‌‌​‌‌‌‌‌​​​‌​​‌‌‌‌‌​‌​‌​‍and the contracts Carvel between Dairy defendant-appellee Rakestraw’s for supplier concerted defendants embodied Products. plaintiffs vio- to deal with the refusals City Wilson, (Wil- York John New A. pre- In a laws. lative of the antitrust Robinson, & lard M. L. Ster- Shearman stipulated plaintiffs trial order the ling, brief), City, for New York on the solely “per rely se” Sons, defendant-appellee Hood & H. P. shown violations of the antitrust laws as Inc. agreements in and other certain written City Irving Weinberger, York L. New which, judgment documents. From a (Albert Wigor, City, L. New on the York exception,1 com- with dismissed the Eagle defendant-appellee brief), for Cone plaints against on the all the defendants Corp. ground plaintiffs failed to had that the laws, Judge, prove LUMBARD, antitrust and of the Before Chief violations FRIENDLY, (S.D.N.Y.1963), F.Supp. MEDINA and Circuit Judges. plaintiffs appeal. System Judge (writing The Franchise LUMBARD, Carvel Chief dissenting part majority in in Although operators the franchise part). independent stores as conduct hugingssmen, their through provisions m “the which in nine actions agreement together is able Dis- Carvel Southern franchise were tried uniform appeal from dis- maintain a chain of stores trict of New York alleged operation. appearance complaints as well as missal of which their obligated his to conduct laws and The dealer violations of the antitrust sought damages a Standard in accordance with the Carvel business treble from agreement. pre-1955 pricing provisions Dawson of the held invalid the Operating (Manual) prices parent organiza Procedure-Manual fixed governs gen great-detail agreement tion, explicitly which pro new including operation store, right-to has_ eral of the vides that the dealer types Second, fix offered prices!- under the hi s sale, prepara agreement recipes obliged for their earlier dealer was tion, placement purchase of ad requirements the nature his entire vertising store, displays supplies, machinery, color equipment, pa goods employees’ uniforms, and the ap from Carvel or Carvel agreement lights requires proved must be turn hours when the store sources. new purchase on. The are identical de ed stores from Carvel approved.. sign, featuring the crown only,., each sources of those slanting part supplies on a flat and cone trademark which are a of the end public front, roof, glass walls at permits product_sold' purchase lights. neon name “Carvel” its sides in machinery.-equip dealer ment, paper goods from-indenendent cream, design long patent. The ice sources so as his store is maintained prepared processed" from a accordance the. mix Manual a specificatinns. dispensed from formula, a patented is secret the Carvel machine which liars Price-Fixing paper The con name"~5r~trademark. tainers, undisputed pre-1955 isIt that Man- cones, spoons all ice cream ual selling prices” established “standard in bear name and some the Carvel obligated to which the dealers were to design. unique in stances are pre-1955 adhere. The franchise re- The chain franchise Carvel stores quired priсes the dealers “To maintain grown approximately has from 180 products designated in, and as Car- approximately 1954 to 400 the time at Operating vel Standard Procedure and presently of trial in 1962. The stores are any price not to conduct reduced sales of throughout portion located the eastern these items without written consent from of the United from to States Maine Judge Carvel.” Dawson held that these Florida and as far west as Wisconsin. price-fixing provisions illegal were gross Their annual sales are six plaintiffs that the four who had entered eight to million dollars. Carvel’s sales into the earlier franchise were entitled supplies, equipment, to the stores damages. to a trial on the issue No machinery high point $5,- reached a appeal aspect was taken from this 532,396 $4,- in 1957 and in 1960 totalled judgment below.2 460,689. provides: The revised franchise “The Special by counsel retained Carvel in right dealer shall have the Car- sell purpose that Dairy drafted new vel’s Frozen Product and/or agreement. form of franchise The by authorized items for sale him under plaintiffs in four of agreement any the actions entered price the terms this at 1955; agreements prior into franchise that the dealer determines. Wherever remaining Carvd_r.eeommends actions price, a. retail became after 1955. franchisees Both is recommendation based Carvel’s agreements corresponding concerning Man experience all factors that uals price; must scrutinized. The proper therefore be into a recom- enter but such agreement important binding upon new effected two mendation is in no manner changes. First, appellants under whereas the dealer.” notwithstanding that contend agreement provision earlier the franchise dealer Carvel obligated products effectively prices was to sell Carvel fix continued to at 54(b) actions, damages although In accordance -with Rule all yet were Judge Federal Rules of Civil Procedure in four of be ascertained Dawson, finding good no reason de- cases. lay, entry judgments directed the by to which contrast letters to the were sold Carvel finding appellants referred, introduc- Carvel Dawson’s

.public that clearly bulletins all ed in evidence circulated contrary erroneous. to the sent as well letters the dealers express absence Even emphasizing had several that Carvel provisions which evidence contractual changed policy prior pricing that its charge scheme, unlawful unlawful right now had the set each dealer substantiated price-fixing although prices, did in- Carvel his own by which of conduct proof course suggested prices retail dicate that effectively main or licensor seller experi- upon its own broad were based price retail ultimate tains control ence in customer sales. sold. Federal general manager Vettel, Fred Carvel’s Packing Beech-Nut Trade Commission since board testified that L. governors primarily operated aas me- appellants direct Ed. among interchange of dium for the ideas pages fact that six our attеntion representative group individual to refer Manual continued of the revised further stated dealers. He selling price”; in let to “Standard had since sometime in 1957 Carvel emphasized several dealers ters to advertising made available the dealers pre cones were 10 and c displays spaces blank for those which left Manual and scribed prices other who dealers wished insert prescribed portions minimum suggested by Carvel or- than those mandatory; Manual were although ganization, appellants ad- sought report to it dealers occasions duced that on some evidence by re from the deviation other dealers posters requests were refused. for such Manual; quirements and of the suggested seek Carvel dealers short, con the evidence-was conducting permission a sale before tradictory-on-the question-whether Carvel prices established attempted other than those impose a bindingprice appellants Moreover, em the Manual. It is not retail-dealers. structure-оmthe gov phasize of a board the existence duty de novo court the of this to consider consisting ap of various dealers ernors conflicting and resolve the evidence Carvel, by pointed of which the function issue; rather, must review we factual concerning tois make recommendations court determination the district the selling suggested price of Car the retail clearly not it is to determine whether or products. vel Ruby Air v. American erroneous. See (1964); lines, Inc., Cir., 11 F.2d 2d 329 Judge noted, the Dawson As Ass’n of Real v. National whereby States United re of means mere existence 494-496, Boards, 339 U.S. Estate price is not are recommended tail levels (1950). 711, 94 1007 L.Ed. 70 S.Ct. a violation sufficient establish Judge support showing evidence There much Act, is a unless there Sherman finding did Carvel of fact that price Dawson’s attempt enforce a structure of an price fixing Maple upon retail an unlawful the tradesmen. See not engage. scheme, say that we cannot States, Flooring v. United Mfrs.’ Ass’n clearly erron conclusion was Dawson’s 69 L.Ed. eous.3 (1925); Ass’n Mfrs.’ Protectivе Cement States, 588, 45 S. v. United Tying Dealing Ar- Exclusive Here, L.Ed. Ct. rangements- provisions explicitly re the franchise right fran- appellants the maintain that The the dealer to the individual served agreements embody And, violations of price chise desired. he to set whatever to sustain commerce interstate decide whether thus need not We charge subjects violation. products allegedly Act Sherman unlaw- part price-fixing sufficiently a were ful arrangement Clayton5 tying inso- in a acts the Sherman4 deemed unlawful they require the dealer to refrain the antitrust far as under abi laws lies l ity selling product producer possesses of a non-Carvel who market! obligate pur- product particular dominance insofar as dealer to ! impose obligation directly j from Carvel or from his chase vendee by supply purchase products approved the; Carvel his source as to which producer only possesses cream ice no of the basic Carvel market dominance formula, mix, prepared consequent but under secrеt to other foreclosure products producers products either also certain other used the non-dominant product preparation or sale of end markets for their merchandise. requirement Certainly public. impact offered economic of such solely products arrangement respect sell an dealer is in no diluted alone, example present would, provisions an if taken inclusion restrict arrangement; dealing solely an exclusive vendee use or sale purchase requirement producer’s products. dealer shall We there only tying but also certain other aspects mix fore measure the of the would, products alone, present if stringent taken Carvel franchise the more tying arrangement. example legality In- standard of established Supreme Supreme dealing asmuch as Court has erected Court and the exclusive legality/ stringent.-test aspects by a much more .of the more standard. liberal which_ tying arrange- to measure with_ above, pre-1955 As noted franchise- ments than thаt-whic-h-is-annlied-to ex- obligated “purchase the dealer to and use. dealerships, consider first the clusive we printed approved standard Carvel appropriate applied where standard goods, paper napkins, cones, extracts,, single provisions both are embodied in a spoons, all other Carvel at. relationship. contractual prices.” post-1955 standard market justification can find no requires We purchase- the dealer to treating aspects of an approved from Carvel or his sources en agreement deal requirements which embodies exclusive tire all sold as a items any differently ing aspects than part as well permits retail but tying arrangement purchase machinery, we a equip would treat dealer ment, paper goods fundamental economic evil alone. The from sources oth Act, commerce, 4. 1 Section of the Sherman 15 U.S.C. to lease or or con- make a sale 1, provides: goods, wares, § sale of tract for merchan- “Every cоntract, dise, machinery, supplies, in the combination or other com- otherwise, conspiracy, modities, patented unpatented,, form of trust or or whether or among consumption, use, in of trade or commerce restraint for or resale within the- States, foreign Territory any or with na- several or United States thereof ”* * * tions, illegal any to be is declared or the District Columbia or insular 2, 2, provides: possession place ju- § Section 15 U.S.C. or other under “Every person monopolize, States, who shall or risdiction United or fix a attempt monopolize, price charged therefor, fr'om, or or combine or discount conspire any per- person upon, price, other or or rebate the con- on sons, any part monopolize dition, agreement, understanding the trade or among States, purchaser or the several commerce or lessee thereof shall not foreign nations, wares, goods, or with shall be deemed use or in mer- deal guilty misdemeanor, and, chandise, machinery, supplies, conviс- on or other punished thereof, competitor compet- tion fine be shall commodities or exceeding fifty dollars, seller, thousand or itors of the lessor or where the by imprisonment exceeding year, lease, effect of such sale or contract punishments, condition, agreement, or both in dis- said for or such sale understanding may cretion of the court.” or be to substantial- ly competition lessen or tend create Clayton Act, monopoly 5. Section of3 15 U.S.C. line of commerce.” 14, provides: § any person “It shall be unlawful for en- gaged commerce, in the course of such 512 second, tied, prod long supply operation for the of uct; so than Carvel

er second, possible foreclosure accordance with is maintained competing sup market outlets specifications.5a Manual product. pliers of the tied The source Arrangements Tying The injury the fundamental ele of this —and given arrangements Tying been arrange requires that such ment which antitrust laws. under shrift short illegal ven ments be deemed —lies Corp. v. Machines Business International power economic with re dor’s “sufficient 131, States, 56 S.Ct. 298 U.S. United appreciably tying spect (1936); 701, Internation ‍‌‌​​​‌​​‌‌‌‌‌‌‌​‌​​​‌‌‌​‌‌​‌‌‌‌‌​​​‌​​‌‌‌‌‌​‌​‌​‍ 1085 80 L.Ed. competition in free the market restrain States, 332 U.S. United al Salt Co. v. product.” Pacific for tied Northern (1947); 12, 392, 20 92 L.Ed. 68 S.Ct. States, supra, Railway 356 Co. v. United Publishing Times-Picayune Co. v. United 6, p. power p. S.Ct. 518. Such U.S. at 78 872, 594, 97 States, 73 S.Ct. 345 U.S. may found be either-in the vendors (1953); Pacific Northern L.Ed. tying of the market dominance product, States, Railway United Co. v. its-uniquicness-or or in (1958); 514, 2 L.Ed.2d 545 S.Ct. particularappeal the consumer. United Loew’s, Inc., States v. United Loew’s, Inc., supra, 371 U.S. States v. (1962). See 97, L.Ed.2d 11 83 S.Ct. p. 45, 83 S.Ct. Tying Validity Turner, generally The Laws, My Arrangements Antitrust affirm the Under the would brothers (1958). judgment all Yet seems court in re Harv.L.Rev. 50 the district regard allegations compelling spects. With clear —circumstances they protection goodwill, tying arrangements, as embodied unlawful may plaintiffs examnle in a valuable trademark. them limited reason that tying justify pre-trial stipulation ar to reliance an otherwise invalid selves solely only situation, rangement. “per But se” the anti “[t]he violations good they рrotection indeed, to estab trust laws and failed since and that use market dominance will necessitate lish Carvel’s specifications sub is af amount of commerce where a substantial clauses product] they be to make the tied fected have failed as well [for stitute practica per could not antitrust so detailed bly out se violation agree. supplied.” Co. Standard Oil I laws. cannot States, 337 U.S. Cal. v. United stipulation, part, states in relevant 1051, 1058, 93 L.Ed. rely se will question is thus threshold proofs will and that their violations embodies Carvel franchise whether agree- limited the written tying arrangement and, so, if whether supplementary ments, other documents justified arrangement as can be testimony thereto, indi- of two the necessary protection Carvel’s for the of trial, prior one whom viduals taken to of goodwill. general Vettel, mana- Fred Carvel’s was ger. stipulation arrangement may tying of seems The effect this plaintiffs A de agreed agreement me. The clear to they the fined as an under which go no further than the docu- product if will vendor sell one attempt- mentary in agrees buy to purchaser evidence alluded inde another ing types product make out their claims of anti- pendent of well. Two as only question characteristically is injury trust The violation. arise economic plaintiffs arrangement: first, in fact introduced whether fore from such an to make out an anti- evidence sufficient alternate sources closure the vendee print post-1955 agreement provides in con name thereon the Carvel 5a. The Dealer, with sales to the the Dealer desires nection with “[i]n the event goods printed products purchase in with Carvel made accordance his Carvel, Carvel shall standards.” sources other than products license of such manufacturers any event, trust violation the Carvel defendants. arks.6 In the claims which I proffers think did. weight The nature of their itself lend added stipulation they gave presumption, the label claim of Carvel’s wholly question. is justification immaterial to that I economic is upon founded possibly can cannot see what turn on the substantial value of its trademark the fact that necessity limited them- and the for contractual re stipulation “per selves what the termed protect straints its dealers se violations.” growth value. No doubt the recent entirely the Carvel chain from court’s focus must be to 400 stores great ques- has been of the record. The crucial attributable in the state measure increasing tion is whether the record satisfies the value of the Carvel requirements proof trademark in appeal terms of antitrust an consumer tying violation. Each ar- concomitant element increase economic power generated rangement must be considered turn. that trademark. The essential element in the Carvel franchise possess Does Carvel the requisite-economic is agreement the trademark license which verage Despite le absence in permits display, the dealer to label data, record economic Substantial products prod sell its retail as “Carvel” light Supreme o/ Court’s deci ucts. To reinforce basic its trademark Loew’s, Inc., sion in United States possesses design Carvel also some nine supra, power may I that such believe patents covering building structure, presumed^ from the use the Carvel advertising displays, freezers principal as the feature trademark apparatus, patents covering three ma system. Loew’s, In Carvel franchise chinery twenty and some trademarks Court declared that “when the * * varying forms for use with the wide va patented copyrighted is or riety which are merchan sufficiency power pre of economic dised at the franchise stores.6a It is the 371 U.S. at sumed.” 83 S.Ct. at itself, lease or license of the trademark 2102, n. I can find little to dis reason array patents buttressed this tinguish, determining legality subsidiary trademarks, to which are tied allegedly tying arrangement, unlawful products. the other generated by power between the economic patent copyright or one hand Having concluded that generated by and that a trademark on the generates presumptively trademаrk suf- cases, Congress other. all three power, economic ficient we must consider granted statutory monopoly has arguments support two advanced places in the hands of the owner proposition that Carvel franchise right, within the limitations of federal embody does not event an unlawful law, protected to do he will with tying arrangement provisions within the product. patent, copy value Clayton First, of the Act. con- right is, course, directly or trademark tended that section 3 that act con- proportionate to the consumer desira only agreements obligate demns bility protected product. purchaser not to “use deal in the * * * I goods no can find reason not to competitor extend aof or com- presumption power of petitors economic seller,” to tradem of the or lessor and that protection given 6. C-2, The to in trademarks is 6a. Exhibit introduced the Oarvel respects defendants, comprised pat- some even more extensive than is of these 82 given patents cоpyrights. ents, design patents, trademarks, that either or and in- trademark, cluding, example, design patent The duration of a ample, may, during for ex- for use, 169,055, 24, 1953, continued be ex- on # issued March beyond years covering building structure; patent tended limit of without time, 1058-59, January 2,731,925, 24, 1956, §§ U.S.C. whereas a # on issued patent expires years, covering piece after 17 § U.S.C. barrel end and copyright years, dispenser tip; design patent 184,- and a after 28 sub- and # ject period years, April 28, 1959, covering to a renewal of 28 issued a top vending § U.S.C. unit for motor vehicles. reaps compete sup- undoubtedly benefit some economic not with does Carvel since intermediary.8 extracts, toppings, its status as cones, ice pliers of or not is no indication whether has been There so forth there mix and cream individually dealers, competition. or in com either of improper foreclosure no bination, prices accept and suppliers could secure lower Generally, or- Carvel’s producers dealers, of directly from local bill the bettеr service from the ders short, products. directly in same order to them rath- In and deliver dealers employing However, of the Car the transac- the benefits secure to Carvel. er than directly products, name his the deal a vel retail is form of sale tion cast right er has forced to surrender his resells the items been which in turn to Carvel negotiate suppliers dealers, suppliers of his own with to the individual acting delivery agents payment price, choice matters such as as Carvel’s aspects delivery. prices and other contract of sale. and Carvel sets may to the Where be traced are sold dealers. such surrender which these items legal leverage point of the form to other From view the economic arising party, trademark, then, adopted, is that Carvel does from its clear arrange tying suppliers compete of these an unlawful with other elements of Certainly Moreover, products. little dif- there is ment have been established. impact Car- in economic between the amount of commerce here involved ference reselling sup- purchasing insubstantial, light is these Carvel’s vel’s production plies of these to the franchise in 1960 and Carvel’s sales dealers - \ $3,965,923 ingredients t instance. alone items first " —J supplies.' other regard the foreclosure With sup- argument advanced in suppliers second franchise of the stores Carvel proposition port the Carvel possible outlets, of the that must as market embody vigorous ar- competition franchise does conceded notj dealing rangement among sup- probably that we are is would exist products tied of individual pliers with series with the initial contract secure sale, together purposes rather organization. Nevertheless, but the Carvel product, is the competition with one unified must the nature ultimately product substantially con- from that which different agree. public. I do not prevail. sumed view the otherwise supplies asjdisfincijtems leverage corporation Carvel sells which the Carvel gal- large example, quantities supervising ten supplying wields —for syr- mix, gallоns competition of chocolate outlets, lons of ten some 400 retail will purchases up, likely forth. Carvel itself so most take the form substantial supplies from a price distinct items these the concomitant concessions suppliers variety effectively who in turn inability suppliers wide of smaller fran-' larger compete producers make individual deliveries who very By price their nature it capable meeting chise outlets. Carvel’s no there reason seems clear service demands. separate as one treat these equal significance Of is the economic although to the ultimate unified impact arrangement prevailing cone a sun- consumer of an ice cream terms of the individual foreclosure to one. dae would seem be opportunity stores having suppliers. proved the es- deal with individual While tying arrangement proscrib- under the franchise the dealer en sentials Clayton Act, joy items,7 fell on some the burden prices lower ed example, example, 8. For the evidenсe indicated 7. For the evidence indicated per charged $10.00 dealers cream to that for Carvel the an ice cone similar paid per which it for ice cream cones 600 thousand $4.80 the dealers to Eagle Corpo- purchased man- $9.50 for from cone the Carvel was on Cone listed price at ufacturer. $5.60 wholesale list ration’s 600, in lots of 25 or more. eases

515 trademark, arrangement justify protect trols to My Carvel to its broth necessary reasonably protect suggest difficulty its “controlling to ers of n something insusceptible precise is it clear that some/’ trademark. While so of pro- quality is essential for the control verbalization as the desired texture and goodwill not re- of tection of Carvel’s taste an ice cream cone or sundae.” —if by quired proper Yet, for a trademark law since Carvel itself manufactures^ licensing agreement, ingredients I. Du see E. Pont none of the sold to the deal-/ ers, Corp. apparently of De Nemours & Co. v. Celanese it has itself surmounted America, difficulty verbalizing 35 recipes 167 F.2d C.C.P.A. (1948); proper preparation Mur- for 3 A.L.R.2d 1213 Arthur of its inf gredients. ray, (D Horst, F.Supp. especially noteworthy Inc. v. It is Engbrecht Mass.1953); Dairy Queen Prod. Co. v. Morse-Starrett Steccone, (N.D.Calif. F.Supp. F.Supp. (D.Kans.1962), it was 1949) justification for Dairy Queen, control this op established that —the proof specifications requires for that the 3,400 erates a nationwide chain of some products to for those offered substitute soft ice cream quite franchise stores sim by complex and de- Carvel’s, Carvel would be so require ilar to does not that its impracticable tailed as to. fon purchase make mix, toppings, dealers or other specifications/ Carvel establish such garnishments directly from it Oil See Standard Co. v. United Cal. approved sources, but instead it estab States, supra, 337 govern specifications lishes such items by periodic and enforces these means of inspection of its franchise stores. This justi- respect I find the record with by fact is no means conclusive control to fication Carvel’s be unsatis- ability Carvel, a somеwhat smaller factory and inconclusive. The evidence chain, to maintain its own standards of Judge before Dawson was for most through quality controls, ‍‌‌​​​‌​​‌‌‌‌‌‌‌​‌​​​‌‌‌​‌‌​‌‌‌‌‌​​​‌​​‌‌‌‌‌​‌​‌​‍similar since part documentary. exception With the may differ, the circumstances it ne but self-serving statement gates proposition logical it is agreement that the dealer’s ob- and reasonable to infer —in the absence ligation purchase from Carvel proof compelling more than the mere part those items which are of the end self-serving statement Carvel’s own necessary order to “[i]n safe- general manager it was reasonable —that guard integrity trade- Carvel’s necessary embody for marks,” the little documents value tying arrangement into its franchise justification. issue trademark agreement. Queen poses Dairy in strik Vettel, general manager, Carvel’s testi- ing insufficiency contrast of the evi toppings fied that the various and other support dence adduced Carvel to garnishments suppliers are made claim. although specifications, to Carvel’s undеr a secret formula as the basic aspects plaintiffs’ The antitrust ice cream mix. Vettel stated that claims were tried more or less as the “impossible” police would be in- lengthy aftermath of the far fraud more stores; yet conceded, dividual he as did aspects Appar- and deceit of the ease. representative Sons, P. Hood & H. ently already all because of the time supplier mix, to Carvel of ice cream spent litigating issues, coun- toppings garnishments sold urged by sel were the district court to pur- Carvel to the dealers could be proofs phase limit their in the antitrust chased elsewhere on the market. essentially documentary of the case light sparse showing, evidence, may explain of this I am and as well plaintiffs’ solely support “per unable find sufficient reliance se” Dawson’s conclusion violations laws. With antitrust arrangement justified by posture, I was in this the neces the case would think sity quality establish con it best to remand the cause to the dis- employing hearing legitimate a reasons such limited а further court trict justification. If Carvel device. the issue ulti- the result its claim Lacking establish could data economic sufficient If Carvel mately same. the established in thus the standard meet plaintiffs would do so the urge were unable Electric, appellants Tampa the here sufficiently all the ele- established have Supreme in Court’s decision the that arrange- an unlawful States, supra, ments Co. v. United Oil Standard controlling prove ment. that need “competition only fore has been that Dealing Arrangements Exclusive of the line in substantial share closed ap noted, our As we have U.S. at of commerce affected.” plication standard of the stricter not comment at 1062. We need 69 S.Ct. Supreme legality Court the established appellants sustain could the whether tying aspects fran of the Carvel to the allegations the doctrine enun under their applying preclude from not us chise does Oil, in for it seems ciated in Standard established flexible the standard more disputable in Electric Taruga dealing arrange for exclusive Court rigоrous the more Court deviated requirement in fran ments to it had established and inflexible rule sell at retail the dealer chise criteria which Oil erected Standard approved products. The Carvel or scrutiny of the economic demand close provision maintain dealing ar of an exclusive ramifications dealership an unlawful exclusive erects rangement determine order do laws. We violative the antitrust anti-competitive probable effects agree. not Bok, Tampa Electric a device. See Ar Exclusive the Problem of Case and Tampa In Electric Co.v. Nashville Clayton Act, rangements Under the 623, 5 L.Ed.2d plain Sup.Ct.Rev. 267, find 281-85. We (1961), Supreme held Court appellants have failed bear Tampa, pub valid contract between this burden. introducing evidence Instead utility, Nashville, sized lic a medium effectsof "economic to establish-the obligated company, Nashville coal Carvel franchise structure they requirements supply Tampa’s entire merely protest-that-anti-competitive-ef twenty-year рeriod over coal solely-from the —one fects inferred arrange dealing form of an exclusive such a exclusive existence of network of discussing necessity of ment. After dealerships. whole tenor But delineating line the relevant of commerce Tampa permit adher not Electric does geographical market, Court and the stringent standard le ence such a gality. illegal declared se” and ver- noted—been^ rely solely any event, we need determining whether stated appellants’ adduce failure to would substan the contract issue concerning relevant evidence concrete tially competition must courts lessen geographical mar line of commerce and strength take into account “the relative anticompetitive probable ef ket parties, proportionate volume of the arrangement. For in of the Carvel fects in relation of commerce involved factor which of at least terms in the relevant total volume commerce significant Supreme Court deemed area, probable immediate market jus Tampa economic Electric —that pre-emption of and future effects which exclusive tification —the might of the that share market dealership-arrangement attack withstands competition therein.” effective legality. on its Court 629. The S.Ct. at found, Judge Dawson As significance of emphasized further system aof “the cornerstone possible justification for economic name of light or trade the trademark arrangement, must be accused product.” (2 1953). The fundamental 204 F.2d Daw- device 331 Cir. agreement concluding fully the Carvel franchise itself is son was warranted licensing the to the individual dealer that entire Carvel the context the right employ system requirement to the the Carvel the that /n£mfe products advertising displays, products his on the no non-Carvel be sold at the re- sells, reasonably necessary he and on tail the store itself. The level is for the design goodwill. protection stores are uniform in as well as of Carvel’s public display in the of the ice cream machinery employed, placement Supplier Contracts advertising displays, products appellants maintain that requirement offered for sale. The that agreements between Carvel and its products Carvel sold at Carvel suppliers mix, various ice cream desirability from outlets derives cones, paper products are violative public identify each Carvel outlet as they of the antitrust laws insofar as one chain which offers identical obligate suppliers not to deal direct products qual- at a uniform standard of ly solely with the individual dealers but ity. certainly do The antitrust laws not with Carvel and not to to deal sell require that the licensor a trademark ap ers merchandise other than that permit to his associate with that licensees proved disagree. Carvel. We products trademark other to unrelated regard With to Carvel’s contracts with customarily those sold mark. under the Rakestraw, produced Hood and public is in It interest ice Carvel cream mix accordance particular sold under one trademark they pledged a secret formula which not subject should be to control divulge, perfectly it seems clear that trademark E. I. Du Pont owner. See De possessor as the of a secret formula for Corp. & Nemours Co. v. Celanese enjoyed ice its mix cream Carvel America, supra; Murray, Arthur Inc. v. and; right chose, sell whomever Horst, supra; Prod. Morse-Starrett Co. right agree was not diluted Steecone, supra. Carvel was not re- v. pro ment with Hood and Rakestraw to quired requests accede duce the mix. Carvel was free to in s they or another dealers ist produce *1, that Hood and Rakestraw permitted or sell Christmas trees ham- solely subject the mix for Carvel and burgers, example, which would have disposition. Carvel’s wishes as to its obligation thrust Carvel to ac- quaint production provision As for itself with sale in the contracts Hood, between Eagle, Rakestraw, these items so as to establish reason- quality manufacturer, Mohawk, able cone controls. paper products, manufaсturer of do Nor the antitrust laws suppliers the products would not sell non-Carvel proscribe a trademark owner es dealers, to the individual we tablishing a chain outlets uniform plaintiffs’ find no merit claims. appearance operation. competi Trademark Carvel cannot be considered in agreements licensing suppliers requiring tion with these from whom it sole purchases supplies, use of the trademarked item with and such an agreement deal, stood attack under the antitrust laws if estab even lished, reasonably necessary by non-competing where when deemed effected enterprises goodwill illegal. protect See, g., trade is not Pack interest e. owner, ard Motor Car mark Denison Fac Co. v. see Mattress Webster Motor tory Co., (5 Spring-Air U.S.App.D.C. 161, Car v. 308 F.2d 243 F.2d 1962); Mfg. denied, cert. Cir. Pick Co. v. General (7 Moreover, Corp., 1935), 80 F.2d 641 Cir. L.Ed.2d 38 Motors agreements certainly prove and such un failed to were sup per se antitrust foreclosed from lawful under the laws. alternate sources ply Corp. Corp., supplier Telecoin Baseom Launder indeed that defend

'.518 Ry. States, requested Pacific 356 U.S. had v. United rn themselves been

.ants (cid:127) (1958). But, 1, 5, as that had re 78 S.Ct. 514 and the dealers make sales to every tying clear, opinion not makes fused. illegal per Tying arrangement se. judgments Accordingly, dis- of the n arrangements in and unreasonable "are affirmed. triet court are party suffi has themselves whenever power respect to the economic with cient Judge, FRIENDLY, with Circuit tying product appreciably restrain joins. MEDINA, Judge, whom Circuit competition in the free market Judge Concurring most of with Chief a ‘not tied insubstantial’ and opinion, Medina and Lumbard’s af amount interstate commerce is I do not that remand as consider 6, U.S. at fected.” 356 S.Ct. pur- respect “tied” claim with Publishing Times-Picayune also Co. See flavoring, toppings and cones is chases of 608-609, States, v. United light required or warranted either recently 73 S.Ct. More pre-trial plaintiffs order to which tying arrangements Court has said agreed. category “may per fall” se vio portion of this order is relevant “though necessarily lations, so.” as follows: States, Motor White Co. v. United agree plaintiffs “4. That L.Ed.2d 738 solely alleged relying are .(1963). per se antitrust violations plain the facts to Here no than laws and make claim other pre-trial order tiffs were limited per will their evidence establish showed had “suffi neither Cárvel se of the antitrust laws. violations power respect cient economic with “5. Plaintiffs’ evidence at tying product appreciably restrain liability trial be on the issue will competition in the free market agreements (a) limited to written product” “a tied nor that not insubstan between Carvel de- entered ‍‌‌​​​‌​​‌‌‌‌‌‌‌​‌​​​‌‌‌​‌‌​‌‌‌‌‌​​​‌​​‌‌‌‌‌​‌​‌​‍into tial amount of commerce affected.” plaintiffs, and other fendants . figures Indeed, prove such as exist would supplementary documents thereto contrary. In 1960 were there explanatory thereof, (b) written York, Massachu New Connecticut and agreements de- between the setts, 250 Carvel dealers out of total supplier defend- fendants and 125,000 ice cream cones outlets where supple- ants, and documents purchased amounting to one could be — explanatоry mentary thereto per fifth of cent of the outlets one (c) testimony thereof, and hereto- doing per apparently about cent fore of a Mr. taken Vettel large Carvel business.1 The other Mr. Bittner.” Jersey Pennsylvania; New states hardly plainer plain- 'It could total 400 Carvel balance of a 1960 confining to claims tiffs themselves were over at one time dealers were scattered which, the antitrust laws violation of they thought, many Maine to as as 8 or 9 states from with- as could sustained west Florida and as as Wisconsin. far meagre data out other market than competed with These dealers of- amount documents contained Queen, Dairy Tastee similar chains — ' f ered. Dari-Isle, King Kone, Freez, Dari-Delite, others, and inde chains agreeing but also with pre-trial units, utilizing pendents mobile relying order, have been operations How tying arrangements chain stores and on the. inclusion of ubiquitous Johnson, and with the in Northe ard in the list of se violations $115,000 per year Cone, Eagle total 1. The Carvel sales 1% —about Massachusetts, supplies in thе three states. sales cones all the cones for averaged York, and New Connecticut

53a Although drug-store. corner Carvel’s desirability the situation where the aggregate insubstantial,” patented sales are “not item is what motivates the light purchaser the totals shed no on the amount of to make further commitments complained give of, up liberty the “tied” sales here or to some of choice as products. See, g., which common to other sense tells us must be a e. United part.2 figures Inc., 45,' 38, minor 1 States v. in footnotes Loew’s 371 U.S. give (1962). case, and 2 some S.Ct. 97 indication of “insub In this stantiality” patented appear of items the commerce affected been vir tually motivating significance even under without in' the rather narrow test indi bringing by agreement. cated dictum about the in Brown Shoe The true Co. v. tyingLitem States, 294, 330, was_rather the trade United 370 U.S. 82 S.Ct. mark, growing repute 1502, (1962), especially whose was intend L.Ed.2d 510 help of cones, ed to the little band Carvel deal with reference to the whose tie-in a justify ers swim bit faster than their numer quality was hardest to of terms uр highly competitive ous only rivals control. Not was of the amount may, stream. of There consequential, commerce in cases these not course acquired any damage where a has trade-mark but was even prominence coupling Eagle that the billings less so. Cone’s to Carvel . averaged per of some further itemits. license would--constitute year, per dealer and $460 peí violation; but such trade mark-up slightly Carvel’s was over — 5% satisfy the market dominance per dealer; mark would or about whether the $25 and Northern damage Times-Picayune test of dealers suffered even that much figures show thal Carvel Pacific. questionable price is since the charged they is not such a mark. them was less than could bought they if in smaller have obtained Tying arrangements differ Carvel, quantities than see fn. 7 to Chief violations, se such as Judge opinion. And, of Lumbard’s price-fixing, United States v. Trenton course, open competing it remained 392, Potteries 47 S.Ct. suppliers to business bid the Carvel (1927), they 71 L.Ed. 700 in that can by soliciting company an itself —in justified ocсasion, proof by as important contrast with eases where protection goodwill may that “the ne produced by tied seller. item specifications their use cessitate” “where Our brother Lumbard for a thinks substitute would be so detailed the first of proof practicably sup deficiencies in could not power to economic plied,” was remedied Oil Car Standard Co. of Calif. and package trade-marks, vel’s license of a States, Standard Stations v. United design patents relating shape building etc., the ing patented depends freez Since the value trade-mark dispensing solely public image conveys, machine. We cannot on the its agree. patented place, In the first holder must exercise controls to assure realistically items cannot be considered himself that the mark not shown in a ^"tying product”- derogatory or light. the focus The record affords no arrangement. Whatever upsetting finding has been said sufficient basis for patented about evils “ties” to Judge require of the District that “To copyrighted meaningful оnly items is specifica Carvel to limit itself to advance figures 2. There surely which indicate vel secret formula mix which could “ingredients” legally 1960 sales of all other than be tied to the Carvel trademark $1,354,599 mix to all dealers amounted to significance, if mark was retain average $3,400 per —or an of less than as he concedes. per year; dealer the record does not make dear whether all these “in- plain- 3. There was evidence that one gredients” purchased were tied. Two-thirds of the tiffs had $621 worth of cones figure $3,965,923 big year, 1959; in Chief Lum- mark-up Carvel’s opinion bard’s constitute sales of the Car- would these have been around $30. quality form all the various that he tions standards considered it accessory impracticable types problem used con to handle the impose specification policing sufficiently mix would was nection impractical persuasive judge and unreasonable burden reasonable that the ” * * * Although it, in was entitled to credit formulation whether or not agree.4 impossibility control of us We little stances see through specification competitor, rare indeed be force the fact that a functioning freezing involving proper licenses machines and the cases machine, see trade-mark and does not a mix made of mechanical sell elements Corp. formula, less Machines a secret is satisfied with International Business exacting 139, provisions. Engbrecht States, 131, 56 v. 298 U.S. S.Ct. See United Queen Dairy F.Supp. (D. (1936); Co. v. 203 Salt 714 701 International Kan.1962). 392, 397-398, Moreover, States, 68 as Vettel also ex 332 United Turner, flavoring (1947); plained, packing 12, 20 tins 92 the in L.Ed. S.Ct. bags Arrangements exactly Tying Validity un or that amount of contain the 10-gallon mix, Laws, required Car Harv.L.Rev. for a can of Antitrust 72 der the Dehydrating encouraged (1958); to an ade Process vel the dealers use but see 50 quate quantity provided Corp., F.2d 653 an auto 292 O.A. Smith Co. v. r 931, Finally denied, 82 limit (1 a Cir.), 368 U.S. matic control. there cert. is inspecting (1961); when 368, 194 United feasible to the amount 7 L.Ed.2d S.Ct. average Corp., purchases 187 Electronics each dealer an v. Jerrold States per year prod $12,000 (E.D.Pa.1960), aff’d F.Supp. than a 545 less 755, (including 567, equipment) 5 in curiаm, and sells 81 S.Ct. ucts (1961), are cases 806 units. L.Ed.2d problem scarcely of con the to relevant the Even to consider were we insusceptible something trolling so design patented patents to machines tex precise desired the verbalization arrange tying part of be relevant a the or cone ice cream ture and taste ment, opinion ruled the Northern Pacific specify sundae; to was able that Carvel thought by idea, some to out the prod supply, whose this its source opinions, implicit been earlier checked, regularly not show does uct it proof patented device of the license of a confided to could be that administration semper ubique to sufficed et show in most states dealers. Furthermore required a market dominance render liability anyone would risk tying arrangement per a se violation.5 foreign injured by substance recognized doing appropriately so it (Sec mix, ALI, Restatement frozen see society of life. The the facts business (Tent. ond), Draft Torts No. 402A egalitarian. patents As had been is not although might 1962); with it not be so although earlier, years said well three respect ingredients purchased from dissent, Report off some choosing, suppliers of own the dealer’s Study Attorney Committee General’s proof it the difficulties of such that (1955), 238: Laws the Antitrust i products in to insist on entitled basic, may patent “The be broad complete it confidence. Vettel’s tes has power in which the economic event timony enterprise success patent makes incident tying flavorings illegal. required uni On distinctive clause patent specifi- 4. was involved one of tlie Vettel testified that the fact give slightest intimation cations to the manufacturer was that cer- did nor crop site; purchased have been tain fruits at the outcome case. are at a how had been the we loss to understand different if that challenged policed by inspection anything, could be on the Court held the deal- If premises. arrangements despite tying unlawful er’s patented, tying item was fact arriving at 5. “In at at its decision in Interna- because of it.” 35G U.S. placed tiоnal no Salt the Court reliance (cid:127) may allegedly illegal hand, patent be narrow and ed as result these why willing explains they unimportant, in which contracts were event pow- virtually no market to limit se violations confer real themselves tying Accordingly, expense where the than incur the of assem- er. rather patentee bling produet patented, gain market what best data permitted They negligible recovery. should to show that would be a including setting, trials, factual the entire have had two one in scope patent fraud, relation in their were defeated claim patented unpatented prod- transcript 4,000 pages; nearly other ucts, with a patent does not create see no sufficient reason to order we third, illegality power requisite to market clause.” Indeed, Pa in Northern statement anticipated by cific had been the remark Oil Standard Co. of Calif. Stand States, supra,

ard Stations United patent U.S. at that a S.Ct. “prima, con evidence” of market facie clearly trol —evidence was rebutted Although lanaguage here. there Inc., supra, United States v. Loew’s wife, Nellie C. Joe ROBERTS and T. 44-48, 97, U.S. at lends S.Ct. Roberts, Appellants, support theory to a mere ex v. description patent istence FUQUAY-VARINA TOBACCO BOARD merely prima is not but irrebutable facie INC., TRADE, al., Appellees. et OF control, evidence of market find we No. 9264. hard to believe that would thus the Court obliquely position reversed taken Appeals United Pacific, position Northern underscor States Court Fourth Circuit. ed Mr. Justice Harlan’s remarks in Argued 22, April 1964. dissent, 514; 17-19, 356 U.S. at language rather read in must be May Decided 1964. previous proscrip context of the Court’s block-booking picture tion of motion films in United Paramount Pic States v. tures, Inc., 156-159, 68 S. (1948), Ct. 92 L.Ed. 1260 371 U. see anal S. 97. There is scant S.Ct. ogy unique movies, between hit or the tabulating computing In machines in Corp. ternational Business Machines States, supra, to which the de United competitor, fendant had but one smaller salt-processing in Inter machines States,

national Salt Co. v. United 332 U. (1947), 392, 68 and Carvel s S.Ct. S; along dispensing which, machine package of its the rest distinctive ‍‌‌​​​‌​​‌‌‌‌‌‌‌​‌​​​‌‌‌​‌‌​‌‌‌‌‌​​​‌​​‌‌‌‌‌​‌​‌​‍de gained only vices, had ice 1% cone market area of its cream concentration, see fn. heaviest triviality of whatever financial

hardships plaintiffs may have suffer-

Case Details

Case Name: Bernard Susser v. Carvel Corporation, Carvel Dari-Freeze Stores, Inc., Carvel Stores Realty Corporation, and Eight Other Cases

Court Name: Court of Appeals for the Second Circuit

Date Published: May 8, 1964

Citation: 332 F.2d 505

Docket Number: 505_1

Court Abbreviation: 2d Cir.