2361 STATE CORPORATION v. SEALY

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

Plaintiff*fn1 sues to recover damages, as provided in Section 4*fn2 of the Clayton Act, for injuries allegedly sustained as the result of violations by the defendants of Sections 1 and 2 of the Sherman Act and Section 3 of the Clayton Act. Discovery is virtually complete. After careful consideration of the entire record, it appears at this time that substantial questions of fact remain and that defendants' motion for summary judgment can be sustained only in part.

The record discloses the following undisputed facts. Defendant Ward is a national retailer of merchandise. Among the many items Ward sells is cotton innerspring and matching box spring bedding. Ward sells nationally advertised brands of such bedding as well as bedding manufactured for Ward to sell under its own brand name, "Style House," so-called "private-label" bedding.

Prior to 1961, it was Ward's policy to purchase its private-label bedding from independent manufacturers of bedding located near its stores throughout the country. Included among those manufacturers was the plaintiff who for many years prior to 1961 manufactured and sold private-label bedding to Ward. Plaintiff's sales were confined to Ward stores in the midwestern States.*fn3 Beginning late in 1959, Ward set out to select a single resource able to supply Ward's private-label bedding needs on a nation-wide basis. Ward considered a number of manufacturers who were ostensibly able to do this. Early in 1961, Ward selected Sealy, Inc. (Sealy) as its "major resource" for its private-label bedding needs. Contemporaneously with its selection of Sealy as its national supplier of private-label bedding, Ward notified all of the bedding manufacturers who were then supplying its private-label bedding needs that Ward intended to deal with them no longer. Among those notified was the plaintiff. After receiving notice, plaintiff endeavored to retain its Ward business, but Ward informed plaintiff that its decision to purchase its private-label bedding "requirements" from Sealy alone was "irrevocable." Ward in fact did purchase any private-label bedding in the years 1961 to 1964 inclusive, the period specified in the complaint, from a source other than Sealy except for purchases of private-label bedding in August, 1963, from Englander, Inc., and in 1964 from Waynewood, Inc. and Wickline Bedding Company.

Ward in fact purchased nothing from Sealy, Inc., however, because Sealy, Inc. functions in this context as a national sales agent for a number of independent manufacturers of bedding who have agreed to participate in what Sealy calls its "national accounts" program. Participants in this program designate Sealy as their agent to solicit the business of, and contract for the sale of bedding to, national purchasers such as Ward. The participating manufacturers here agreed to sell bedding to the Ward stores that was manufactured to specifications dictated by Sealy only in the territory assigned to them by Sealy and only at prices specified by Sealy. The participants in the Sealy national accounts program were the same manufacturers who produce bedding under the Sealy trademark pursuant to license agreement. Here, however, no bedding produced under the Sealy trademark is involved.

The complaint, filed March 10, 1965, alleges that Section 1 of the Sherman Act*fn4 has been violated because all defendants conspired to prevent firms other than participants in the Sealy national accounts program "from selling cotton and innerspring mattresses and matching box springs" to Ward. This conspiracy allegedly consisted of a "continuing agreement" among the defendants that only participants in the Sealy program would sell cotton and innerspring bedding to Ward at prices determined by Sealy, and that Ward "would not purchase" any such bedding "from any competitor" of a participant in the Sealy program. It is further alleged that between October, 1961, and February, 1964, this conspiracy was implemented by an exclusive dealing agreement between Ward and Sealy, Inc. in violation of Section 3 of the Clayton Act.*fn5

The complaint also alleges a violation of Section 2 of the Sherman Act,*fn6 but it does nothing more than state that Section 2 has been violated. Nowhere does plaintiff discuss monopoly power, the relevant market, or whether the purpose or effect of the charged conspiracy was to monopolize or to attempt to monopolize.

All defendants move for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Defendants assert that they are entitled to judgment as a matter of law because (1) the statute of limitations bars the action, (2) plaintiff was not in fact damaged as a result of any loss of the Ward business, (3) there was no exclusive dealing agreement between Ward and Sealy or the participants in its national accounts program, and (4) there was no "conspiracy" among the defendants to foreclose plaintiff and others similarly situated from selling bedding to Ward.

The record clearly demonstrates that it is the termination of plaintiff as a supplier of Ward in compliance with the alleged exclusive dealing agreement that is the heart of plaintiff's complaint. The complaint, read most liberally, charges nothing more, and the proceedings to date show clearly that absent an unlawful exclusive dealing agreement, plaintiff may not recover. Of particular import is the fact that during the period the alleged unlawful exclusive dealing agreement was in effect, plaintiff states that it stood ready to sell Ward bedding of like quality and price as that offered to Ward by Sealy.*fn7

I. The Statute of Limitations.

Defendants rely in part on Momand v. Universal Film Exchanges, Inc., 172 F.2d 37 (1st Cir. 1948), and Baldwin v. Loew's Inc., supra. These cases demonstrate only that the statute of limitations does not commence to run against the instigation of criminal proceedings until the commission of the last overt act in compliance with the conspiracy regardless of whether the act causes injury or damage. Applying these principles here, it is clear that the statute of limitations commenced to run from the date on which the plaintiff first sustained injury as the result of the alleged exclusive dealing agreement.

The record shows beyond any genuine question that plaintiff was notified in February or early in March, 1961,*fn9 that Ward intended to terminate plaintiff as a supplier and that this decision was irrevocable. Plaintiff last sold beds to Ward in August, 1961. Suit was filed March 10, 1965. With the case in this posture, defendants insist that it is controlled by Emich Motors Co. v. General Motors Corp., 229 F.2d 714 (7th Cir. 1956).

This cannot be so, however, because in Emich, unlike here, a specific contractual relationship between the parties was in existence, and plaintiff there clearly had the right to bring suit for unlawful breach of the contract upon receiving notice of termination. 229 F.2d at 720. Here no contract existed between the parties, and Ward's notice terminated nothing of legal significance. That plaintiff received notice more than four years prior to the commencement of this suit of Ward's decision to eliminate plaintiff as a supplier at some point in the future does not bar plaintiff's right to recover. At most, all that is barred is plaintiff's right to recover damages for injuries sustained as the actual result of receiving notice, here none. When plaintiff was notified of Ward's decision not to enter into any future agreements to purchase bedding from the plaintiff, it sustained no real injury since Ward at that time and for many months thereafter continued to purchase bedding from plaintiff. Plaintiff had no right to maintain suit until it was in fact injured, and plaintiff sustained no injury as a result of the alleged exclusive dealing agreement ...