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CREST AUTO SUPPLIES, INC. v. ERO MANUFACTURING CO.

June 25, 1965

CREST AUTO SUPPLIES, INC., A CORPORATION, PROTECTO OF MICHIGAN, INC., A CORPORATION, AND MORRIS EINHORN, PLAINTIFFS,
v.
ERO MANUFACTURING CO., A CORPORATION, DEFENDANT AND COUNTER-PLAINTIFF, CREST AUTO SUPPLIES, INC., A CORPORATION, PROTECTO OF MICHIGAN, INC., A CORPORATION, MORRIS EINHORN, ALBERT GARFIELD, ORVILLE B. LEFKO, GEORGE HAAR AND BEN KRUGEL, COUNTER-DEFENDANTS.



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

  Motion of defendants for summary judgment and/or to dismiss.

Motion of defendants for summary judgment on its counterclaims.

This is a six count civil anti-trust action brought by three "exclusive franchisees" against their supplier, a manufacturer of automobile seat covers and related accessories. It is alleged that beginning in 1958, and ending in 1961, the defendant entered into a series of franchise agreements with dealers around the country, including the instant plaintiffs, under the terms of which, said franchisees were licensed to use the trade name "Protecto," and were granted exclusive dealerships in specified territories. In consideration of such grants, it is alleged, the dealers agreed not to sell, use, install, etc. any other product of any other firm without the written consent of the defendant. In Count I, plaintiff Crest charges defendant Ero with (1) violating Sec. 3 of the Clayton Anti-Trust Act by requiring it to buy exclusively from Ero; (2) violating Sec. 1 of the Sherman Anti-Trust Act by allegedly requiring Crest to maintain resale prices; and (3) violating Sec. 2 of the Clayton Act, as amended by the Robinson-Patman Act, by allegedly discriminating against Crest both as to prices and services. In Counts II and III, plaintiffs Protecto of Michigan and Einhorn adopt and repeat the same allegations.

In Count IV, plaintiff Crest alleges that pursuant to the franchise contract, it paid to Ero, for advertising, an amount equal to 20 per cent of its purchases, and that Ero did not use said money for the purpose intended. In Counts V and VI, the other plaintiffs again repeat and adopt the same allegations.

Defendant has filed a series of seven counterclaims, based on amounts allegedly due Protecto Products Co., a wholly-owned subsidiary of defendant (counter-plaintiff), under various subleases, franchise contracts, and guarantees executed by the plaintiffs and additional parties defendant to the counterclaims. In Count I, Ero alleges that plaintiff Crest owes Protecto $5,757.98 for unpaid rent and other expenses under a sublease of premises located at 6300 North Lincoln Avenue in Chicago. Judgment is sought against Crest, and one Albert Garfield as guarantor. In Counts II and III, defendant alleges that plaintiff Protecto of Michigan, Inc. owes $27,045.10, and $25,500.00 respectively for unpaid rent and other miscellaneous expenses under subleases of premises located at 1755 Dix Avenue, Lincoln Park, Michigan, and 14185 Greenfield Road, Detroit, Michigan. In addition to the named plaintiff-counter-defendant, judgment is sought against Orville Lefko, George Haar, and Ben Krugel as guarantors.

Count IV is brought against the same counter-defendants mentioned in II and III, for $42,403.76, allegedly due for goods sold and delivered and advertising charges. Counts V, VI, and VII are brought against plaintiff Einhorn for rent due under subleases of premises located at 3101 Reading Road and 1684 Central Parkway, Cincinnati, Ohio, and for money allegedly owing for goods sold and delivered, and for advertising charges. Judgment is sought for $7,413.50, $30,300, and $15,255.09 respectively.

Defendant Ero has filed a series of motions for summary judgment and/or to dismiss the complaint, and for summary judgment on the counterclaims. Each shall be considered separately.

In that case, we held, as we do here today, that a litigant cannot be heard to complain of injuries which resulted from alleged antitrust violations to which it was a voluntary party. As we stated in Rayco, supra, when considering this in pari delicto defense:

  "The treble damage penalties of the Clayton Act are
  strong medicine. They are intended primarily for the
  use of an aggrieved competitor, whose business has
  been injured by an exclusive dealing contract
  limiting his outlets. * * * A dealer who voluntarily
  enters into an agreement with his supplier in
  consideration of other benefits conferred upon him,
  lacks the same equitable basis to complain of the
  exclusive dealing provision as a foreclosed
  competitor of the seller. The logic in this reasoning
  is inescapable. If dealers were permitted to bring
  treble damage suits at will, there would be a rash of
  responses to exclusive dealership offering, followed
  by the unwarranted high profit of a Clayton Act
  suit." (at p. 599.)

See Pa. Water & Power Co. v. Consolidated Gas Electric Light & Power Co., (4th Cir., 1953) 209 F.2d 131, cert. den. 347 U.S. 960, 74 S.Ct. 709, 98 L.Ed. 1104 (1954); Northwestern Oil Co. v. Socony-Vacuum Oil Co., (7th Cir., 1943) 138 F.2d 967, 971, cert. den. 321 U.S. 792, 64 S.Ct. 790, 88 L.Ed. 1081 (1944); Kershaw v. Kershaw Mfg. Co., (D.C. Ala., 1962) 209 F. Supp. 447, 454.

The cases cited by plaintiff, Kiefer-Stewart Co. v. Joseph Seagram and Sons, Inc., 340 U.S. 211, 71 S.Ct. 259, 95 L.Ed. 219 (1951); Trebuhs Realty Co. v. News Syndicate, (D.C.N.Y., 1952) 107 F. Supp. 595; Moore v. Mead Service Co. (10th Cir., 1951) 190 F.2d 540, and others, were all considered by this Court in the Rayco decision, and distinguished. Each of these cases deal with the general proposition that the alleged illegal conduct of one party cannot immunize the other party against liability to those they injured. However, these holdings, disallowing the in pari delicto defense were limited to specific situations where the plaintiff had not violated the antitrust acts in combination with the defendant. This is the crucial distinction applied in Rayco, and reapplied today.

While Davidson v. K.C. Star Co. (D.C.Mo., 1962) 202 F. Supp. 613, 619, on which we relied in Rayco, has been subsequently reversed by the Eighth Circuit Court of Appeals, (Bales v. K.C. Star Co. (8th Cir., 1964) 336 F.2d 439), it must be noted that said reversal was based on the fact that the plaintiff was coerced into entering into the antitrust violations. That "coercion" argument was considered by this Court in Rayco, with regard to our discussion of Ring v. Spina, (2d Cir., 1945) 148 F.2d 647, and rejected on the facts before us. Indeed, we might note the clear distinction made by the 8th Circuit in Bales on this issue:

  "Of course, if the plaintiffs actually were in pari
  delicto with the defendants in the alleged endeavor
  of the Star to prevent competition and create a
  monopoly for itself in the area, ...

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