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PARMELEE TRANSPORTATION COMPANY v. KEESHIN

June 30, 1960

PARMELEE TRANSPORTATION COMPANY, A DELAWARE CORPORATION, PLAINTIFF,
v.
JOHN L. KEESHIN ET AL., DEFENDANTS.



The opinion of the court was delivered by: Miner, District Judge.

The complaint alleges, and the evidence shows, that 21 railroads operate passenger service terminating in Chicago at one of eight railroad stations. No railroad provides passenger service through Chicago. Thus, it is necessary for any through passenger arriving in Chicago by rail to transfer from one train to another and usually from one station to another. In order to provide a complete through service, the railroads provide transfer from one station to another for through passengers and their baggage, the outgoing line paying the transfer charge.

The evidence shows that early in 1954, as a result of a demand by Parmelee for a 19¢ increase in the coupon charge, the 21 railroads designated a committee of six of their number "to make a study of the transfer situation, including various types of operation that can be devised to definitely meet the needs of the public without increasing the cost to the railroads; report and recommendation to be made to Chicago terminal lines for consideration at a later meeting." (Proceedings of Meeting, Chicago Terminal Lines, Jan. 29, 1954.) The committee chosen consisted of the six railroad defendants, being respectively the principal lines using the major terminals.

The evidence also shows that the committee representatives approached a substantial number of persons and firms which they thought were qualified and might be interested in rendering the transfer service, including John L. Keeshin, a substantial motor truck operator. The Committee held meetings with the various prospective bidders. Eventually, by reason of lack of interest on the part of other bidders or their unwillingness to provide the kind of service the railroads thought was required, the field was narrowed to Parmelee and Keeshin.

Keeshin's initial written bid was submitted on December 15, 1954. He proposed to render the service during the first year for $1.20 per coupon, which was 2¢ per coupon less than Parmelee was then charging. (Parmelee had been granted an increase to $1.22 from the $1.05 rate that was in effect at the beginning of that year, following the demand for rate increase referred to above.) Keeshin proposed that in the subsequent years his coupon charge would be increased 1¢ for each 5¢ per hour wage increase he was required to grant his employees. To permit him to amortize the investment necessary to entry into the business, he requested a five-year contract. On January 15, 1955, following an agreement covering wages of drivers for a three year period, Keeshin modified his proposal by placing ceilings of $1.22 and $1.23 per coupon in effect for the second and third years, respectively. Keeshin also proposed, in his original proposal, to provide new equipment, to replace his passenger equipment every thirty months, to air condition his passenger equipment and to dispatch his vehicles by means of two-way radios. He also agreed to make his books available for inspection by the railroads at any time.

On April 6, 1955, Keeshin wrote a letter amplifying his previous proposal and stating that, while he recommended that trailers be used to handle baggage and that the railroads have their personnel load and unload stationed trailers as the more economical arrangement for them, he would be willing to continue the baggage handling system which had been in operation for many years with Parmelee. His letter also amplified various portions of his original proposal, but added nothing new in substance, except the assurance that his coupon charge was firm regardless of volume of passenger business.

On May 19, 1955, the committee met with Keeshin and Parmelee officials separately to discuss the respective proposals. Parmelee then withdrew its request that the railroads increase the coupon charge of 1¢ for each 1% decrease in passenger volume. However, Parmelee did not at that time put any ceiling on its charge for the second and third years, other than a ceiling of $1.25, which was applicable to each year of the contract period subsequent to the first. Parmelee did not offer air conditioning, radio dispatching or any schedule for equipment replacement, and declined to let the railroads see its books.

On May 20, 1955, Morris Markin, Chairman of the Board of Directors and principal negotiator for Parmelee, telephoned the chairman of the railroad committee, and advised him that Parmelee would place the following ceilings on its coupon charge: first year — $1.20; second year — $1.22; third year — $1.23; fourth year — $1.24; and balance of contract $1.25. Markin confirmed this change by letter.

The committee met on June 3, 1955, and unanimously voted to recommend to the 21 railroads that the proposal of Keeshin be accepted. On June 13, the 21 railroads approved the recommendation. Parmelee and Keeshin were notified of the railroads' decision.

Subsequently, Keeshin formed defendant, Railroad Transfer Service, Inc., for the purpose of performing the transfer service and the railroads negotiated and entered into a five-year written contract with that company for the performance of the service, operations under the contract to commence October 1, 1955. Railroad Transfer Service has been performing the transfer service since that date.

The foregoing facts are undisputed. The dispute concerns the means by which the railroads were induced to reach their decision to award the transfer contract to Keeshin rather than to Parmelee.

Parmelee alleges that Keeshin induced Cross, who was then a member of the Interstate Commerce Commission, to "influence, induce and persuade" the defendant railroads, and through them the 21 Chicago terminal lines, to accept Keeshin's proposal for a five year exclusive contract instead of Parmelee's proposal for a six and one-half year exclusive contract. (Complaint, par. 31)

These allegations are denied by all the defendants. The defendants contend that the proposals of Keeshin and Parmelee were considered on their merits and that the Keeshin proposal was selected by the railroads in the exercise of their sound business judgment.

Plaintiff's allegations of public injury, apart from the assertion that Cross was disabled as a result of his alleged undertaking from adequately performing his duties as a member of the Interstate Commerce Commission (Complaint, par. 34(i)), are that the services performed by Railroad Transfer are "more costly to said railroads and less extensive and valuable than the services previously performed by plaintiff and which plaintiff had offered to continue to perform" (pars. 33(f) and (i), 34(d)), and that the travelling public will "ultimately" be affected by the alleged increased cost and will be "prejudicially" affected by the alleged decrease in the "quality or extent" of the service. (Complaint, par. 19) These allegations of public injury are denied by the defendants.

Plaintiff also alleges that it has been damaged by being deprived of profits in the sum of $6,400,000 "it would have earned" had it been awarded the contract. (Complaint, par. 35.) Plaintiff seeks a judgment in this amount trebled, or in the amount of $19,200,000, and seeks an injunction against performance of the contract or continuation of the alleged conspiracy.

In addition to the foregoing allegations of ultimate fact, Parmelee alleges that the acts of the defendants constituted an

  "unlawful combination, conspiracy and concert of
  action to eliminate all competition for
  contracts * * * to transport interstate passengers
  and their baggage * * *, to eliminate all
  competition for the rendition of pick-up and
  delivery services, to foreclose all future
  competition for such contracts and services, and to
  restrain and monopolize the aforesaid interstate
  commerce in violation of Secs. 1 and 2 of the
  Sherman Act." (Par. 31)

Soon after the action was commenced, the defendants (with the exception of defendant Cross, who answered) filed motions to dismiss on the ground that the complaint failed to state a claim upon which relief could be granted. This motion was considered on briefs by Judge Philip L. Sullivan, to whom the case was then assigned, and overruled by him. The defendants who had filed motions then answered. Extensive discovery proceedings followed, during which thousands of pages of depositions were taken.

After discovery had been completed and after the first pretrial conference had been held before Judge Robson, to whom the case was then assigned, plaintiff moved for a partial summary judgment holding the exclusive five-year contract which had been awarded Keeshin unlawful on the ground that it constituted, per se, a violation of the antitrust laws. This motion was considered by me on briefs, after the case was placed on my docket, and was overruled. The case was then set for trial.

In preparation for the trial, I reviewed the pleadings and briefs and other papers in the file and also certain pertinent decisions handed down after the briefs on the motion to dismiss were written. As a result of this review, I concluded that this might be an appropriate case for the operation of this Court's Rule 21, which implements Federal Rules of Civil Procedure, rule 42(b), 28 U.S.C.A., i.e., in which to order a separate trial of the separate issue of public injury. See Marks Food Corp. v. Barbara Ann Baking Co., 9 Cir., 1960, 274 F.2d 934, 936.

Shortly before the trial, the Court orally announced its views to the parties and asked that the parties present arguments to the Court on the question of whether a separate trial of the issue of public injury should be held. Both sides favored immediate trial of the entire case. Plaintiff opposed the separation on legal grounds, arguing that it was unnecessary for plaintiff to prove public injury as such; and defendants opposed the proposal on various practical grounds and on the ground that they desired to be vindicated by a trial on the merits. Notwithstanding the opposition of all parties, the Court concluded that it was in the interest of efficient judicial administration and in the interest of justice to try separately the issue of public injury.

Pursuant to the Court's order a jury was selected and impaneled to try the issue of public injury. Plaintiff and defendants introduced evidence on that issue. Plaintiff's position throughout the trial was that public injury was inferable as a matter of law from proof of a violation of the antitrust laws, that it was only necessary for plaintiff to prove a violation and that it was unnecessary to prove public injury as a separate element. On this theory, plaintiff made offers of proof of its entire case, including the evidence it claimed established a violation of the antitrust laws and some evidence in support of its allegations of damages.

Defendants severally moved for a directed verdict at the close of plaintiff's evidence, and their motions were overruled. Both plaintiff and defendants moved for directed verdicts at the close of all the evidence, and these motions were overruled and the Court at the same time reserved its rulings. The issue of public injury was submitted to the jury by a special verdict which asked the jury to determine whether the award of the contract to Keeshin rather than Parmelee had resulted in injury to the public. The jury answered the question in the negative.

Public Injury

Unless a per se violation of the antitrust law is established, plaintiff is required to prove that the public at large has suffered or will suffer economic harm as a result of the alleged violation, i.e., that there has been an appreciable lessening in the service or the availability of the products to the public or that the public has been deprived of a product or service of over-all superiority. Radiant Burners, Inc. v. Peoples Gas, Light & Coke Co., 7 Cir., 1959, 273 F.2d 196, 200, certiorari granted 1960, 80 S.Ct. 1249 (in which the court viewed the complaint as not alleging a per se violation); Reliable Volkswagen Sales and Service Co., Inc. v. World-Wide Automobile Corp., C.C.H.Trade Reg.Serv., para. 69,644 (D.N.J. 1960); United States v. Bitz, D.C.S.D.N.Y. 1959, 179 F. Supp. 80.

For the reasons stated below in this opinion, the Court has concluded that neither the complaint nor the evidence and offers of proof, taking the latter as proved, charge or establish prima facie a per se violation of the antitrust laws. This case does not involve a boycott, as did Klor's, Inc. v. Broadway-Hale Stores, Inc., 1958, 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741. This appears not only from the complaint but from the evidence offered by plaintiff. Proceeding on the theory that proof of a violation of the antitrust laws without more, establishes public injury, plaintiff offered its evidence as to the conduct alleged to be a violation. This offered evidence, viewed in the light most favorable to plaintiff, does not establish, prima facie, a boycott or any other per se violation of the antitrust laws.

At the most it tends to prove that the railroads yielded to Cross' persuasions that Keeshin be selected as the transfer agent. There is no evidence or offer tending to show any agreement not to allow Parmelee to bid or not to consider Parmelee's bid or not to deal with Parmelee, except as any exclusive contract necessarily implies agreement not to contract with others.

Plaintiff, having failed to show, prima facie, a per se violation, was required to allege and prove public injury, even assuming the complaint charged a restraint of trade which, upon application of the rule of reason, might be held unlawful.

The Court finds that the public injury element, as specifically pleaded in the complaint herein, is an essential part of plaintiff's case in its action for treble damages for alleged violation of the antitrust laws, and that there is no violation by defendants unless their ...


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