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Consolidated Laboratories Inc. v. Shandon Scientific Co.

July 2, 1969

CONSOLIDATED LABORATORIES, INC., A CORPORATION, PLAINTIFF-APPELLANT,
v.
SHANDON SCIENTIFIC COMPANY, LTD., A CORPORATION, SHANDON SCIENTIFIC COMPANY, INC., A CORPORATION, SHANDON SCIENTIFIC INDUSTRIES, LTD., A CORPORATION, ERNEST R. SHANDON, AND GEORGE D. WELCH, DEFENDANTS-APPELLEES



Hastings, Senior Circuit Judge, and Kiley and Swygert, Circuit Judges.

Author: Hastings

HASTINGS, Senior Circuit Judge.

Plaintiff, Consolidated Laboratories, Inc. (Consolidated), appeals from a summary judgment of dismissal entered by the district court for the defendants, Shandon Scientific Company, Ltd., Shandon Scientific Industries, Ltd. (Shandon of London),*fn1 Shandon Scientific Company, Inc. (Shandon of Pennsylvania), corporations, and Ernest R. Shandon, and George D. Welch. We shall summarize the facts relevant to this appeal.*fn2

Consolidated instituted this diversity action charging that Shandon of London breached its contract with Consolidated and that Shandon of Pennsylvania and its president, George Welch, and Ernest Shandon unlawfully and maliciously induced such breach of contract. Consolidated sought an injunction and damages.

The record reveals that Shandon of London is an English manufacturer of scientific products for biological and biochemical laboratories. Beginning in the final quarter of 1950, Consolidated became the sole distributor for Shandon scientific equipment in the United States. After negotiations, Consolidated and Shandon of London formalized this relationship by executing a written contract on May 15, 1963, which provided that Consolidated would have "exclusive rights to market" certain Shandon products in the United States and in specified Territories for a period of five years.

It is evident there was economic dissatisfaction with the business relationship established under the 1963 agreement. The precise reasons for the dissatisfaction appear to be in dispute.

An affidavit filed by Ernest R. Shandon states that he met with Dr. George H. Scherr, Vice-President and Chairman of the Board of Directors of Consolidated, on June 28, 1965, at Consolidated's Illinois office. Shandon states that during this meeting he discussed with Scherr the possibility of canceling their 1963 contract due to Consolidated's failure to perform in accordance with the terms of that contract. The discussion allegedly focused on Consolidated's failure to meet the terms of payment,*fn3 failure to adequately promote and advertise Shandon's products and failure to maintain an adequate rate of growth in sales.

By affidavit, Dr. Scherr states that he had occasion to meet with Ernest Shandon on May 12, 1964, and on June 28, 1965. At the May, 1964 conference, discussion concerned resolving "three significant problems" which had arisen under the 1963 agreement: restyling Shandon products to suit the demands of the American market, reducing the time lag between Consolidated orders and delivery by Shandon of London and improving the allocation of credit burden between the parties. At the June, 1965 meeting, affiant states that Ernest Shandon voiced dissatisfaction at the rate of growth in Shandon sales but expressly stated that he could not "find fault with the efforts and performance of Consolidated in promoting the sale of Shandon Products * * *", and that there was no threat of canceling the 1963 agreement.

The record further reveals that on September 23, 1965, a meeting took place in London between Dr. Scherr and Shandon of London's board of directors. As a result of this conference, the parties mutually agreed to terminate the 1963 contract and did so by a written memorandum which in relevant part reads:

"Memorandum that it has been agreed between the undersigned Shandon Scientific Co., Ltd., and Consolidated Laboratories Inc., as follows:

(1) The Memorandum of Agreement made between us dated 1st May 1963 shall be and is hereby terminated by mutual consent in consideration of the exchange of the attached letter of intent dated the 27th September, 1965.

(2) Each party hereby agrees and acknowledges that it has no outstanding claim against the other except in respect of goods supplied."

The "letter of intent" referred to by the parties in the memorandum of cancellation redefined the Consolidated-Shandon of London contractual relationship and in relevant part reads:

"We hereby confirm that from today's date, until the appointment of a new main distributor in the United States, we shall continue to supply you with those Shandon products scheduled in the Agreement dated the ...


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