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June 30, 1952


The opinion of the court was delivered by: FORMAN

Plaintiff, Philip A. Singer, in his complaint, sets forth, among other things, the following allegations:

Upon the failure of a corporation of which he and his brother were co-owners, the defendant, A. Hollander & Son, Inc., in November of 1939 accepted plaintiff's oral proposal to take charge of the plant of defendant in Long Branch, New Jersey at a salary of $ 150 per week and proceed to process rabbit furs using formulae devised and owned by the plaintiff; that a written contract of employment, dated February 10, 1940, and running until December 31, 1944, was presented to plaintiff by defendant but it was not executed until subsequently, in the spring or early summer of 1940; that differences arose between plaintiff and defendant during the year 1942 and plaintiff sought to be released from the contract but defendant refused, and on or about January 1, 1943, suspended plaintiff from the performance of his active duties pursuant to Paragraph 'Eighth' of the agreement in which state he was continued until the terminal date fixed in the contract, that plaintiff demanded that he be given work or released from the contract, but his request was refused.

 That the contract, and particularly the restrictive provisions of its Paragraphs 'Fourth' *fn1" and 'Eighth' *fn2" constituted agreements in restraint of trade or commerce among the several states and with foreign nations and are illegal under the Sherman and Clayton Anti-Trust Acts, 15 U.S.C.A.Chapter 1.

 That plaintiff and defendant were processors of furs in the course of which commerce among the several states and with foreign nations is affected and that the restrictions complained of were intended to operate and did operate to prevent or reduce competition

 '(a) as to the price to be paid for processing services; and (b) the introduction of new colors on furs of better quality thereby depriving the public of the benefit of reduction in price of the processing service and of the finished garment by reason of competition and the increase in the finished products by reason of the introduction of new colors of furs.'

 That prior to 1940 plaintiff was an active competitor of defendant in several branches of the industry and that the contract and Paragraph 'Eighth' were intended to enable defendant to place plaintiff in a state of idleness so as to prevent plaintiff from re-engaging in the industry and to deny the public the advantage of competition and the talent, skill and experience of the plaintiff.

 That there are many branches of the fur dressing and dyeing industry in which some companies devote themselves exclusively to the dressing or dyeing of a given fur, others to dressing and dyeing processes where those are inseparable and still others are engaged solely in striping furs which are dyed by others and substantially no processor engages at any time in the dressing and dyeing of all of the dozens of furs in commercial use; that competition among processors consists essentially of producing new shades or colors of furs.

 That the formulae and processes utilized by plaintiff in his employment by defendant were his own, acquired by him prior to said employment, and that other processes which plaintiff sought to develop during employment with defendant were commercially unsound and conceded to be so by the defendant; that at no time did defendant entrust plaintiff with any formula or process or any business methods which were of a nature which would require or justify the exaction of any restriction with respect to competitive activities after the termination of the term of their contract and that in any event the restriction contained in the fourth paragraph of the contract is unreasonably broad since it relates to all of the branches of the industry and for the reason that no information with respect to rabbit could be used competitively against defendant in other branches of the industry.

 That on or about September 5, 1945, defendant instituted against plaintiff, Imperial Fur Blending Corporation, Richard Villani (now deceased), and Robert Caruba, an action in the Court of Chancery in the State of New Jersey seeking to enforce the restrictive provisions of the said contract both by way of injunctive relief and the recovery of damages.

 That on November 24, 1945 the defendant obtained a temporary injunction in said proceedings restraining plaintiff from continuing his then employment with the co-defendant in the said action, Imperial Fur Blending Corporation, which restraint continued in effect until the expiration of Paragraph 'Fourth' of the contract, to wit, December 31, 1946. That those proceedings were instituted and are being maintained by the defendant herein in furtherance of the illegal purpose denounced by said acts of Congress; that after trial the complaint filed in the State court was dismissed by the trial court on the ground that the defendant was guilty of unclean hands, but on appeal to the Supreme Court of New Jersey the judgment was reversed and the cause remanded. A. Hollander & Son, Inc., v. Imperial Fur Blending Corp., 2 N.J. 235, 66 A.2d 319. That the opinion of the Supreme Court of New Jersey provides that the plaintiff herein account for the sum of $ 150 per week, received in salary from January 1, 1943 to December 31, 1944, and that the several defendants in the said state action account for profits made by them as a result of operations conducted in violation of said restrictive covenant. That the defendant is about to enter an order or judgment in the trial court pursuant to the mandate of the appellate court and to proceed with an accounting.

 That the Court of Chancery of New Jersey was without jurisdiction to entertain the causes of action alleged in this complaint and they were not submitted to said court for adjudication.

 That the defendant is the largest processor of furs in the industry in the United States and occupies a preeminent position in the field dominating the industry and doing about thirty percent of all the fur processing work in the country monopolizing and attempting to monopolize the industry within the meaning of the acts of Congress; that it has exacted and exacts from all of its dyers and other key personnel, contracts in the same form and substance as the one of which plaintiff complains and that they are intended by defendant as a means and method whereby the defendant forecloses skillful and talented dyers in its employ from leaving their employment and entering into competition with defendant; that plaintiff has been and will be injured in his business and in his property by reason of defendant's acts as follows: (a) loss of income and earnings which the plaintiff would have been able to obtain from January 1, 1943 through December 31, 1946 by engaging as an independent processor and by obtaining employment in the industry, (b) loss of opportunity to reestablish himself properly in the industry to capitalize upon his standing in the industry and to enhance his skill and experience by participating actively in processing work, (c) damage by reason of any recovery which the defendant herein may obtain against the plaintiff in the stated action described above and to the extent of any such recovery, (d) loss by reason of expenses and obligations incurred by plaintiff in defense of said litigation in the said court.

 Thereby plaintiff claims he has been damaged to the extent of $ 150,000 which he seeks to recover three-fold, plus the cost of suit, including a reasonable amount for attorneys' fees.

 Plaintiff includes a second count in his complaint in which he repeats the allegations of the first count and alleges further that the continuance of the litigation in the State court and the enforcement of any judgment therein against him or his co-defendants will result in further injury to the plaintiff in his business and property, in violation of the acts of Congress; that defendant has threatened to sue all who use the processes of the Imperial Fur Blending Corporation or handle products so processed by that company, and the institution of any such action would grievously injure plaintiff in his business and property by impairing his standing in the industry and the good will which plaintiff has established among users of processing services so plaintiff demands judgment against defendant:

 (1) Determining and adjudging that the same contract and the provisions thereof and the said monopoly and attempted monopoly therein above described are illegal and violative of the Acts of Congress referred to in the complaint;

 (2) Permanently restraining and enjoining the defendant from proceeding with litigation in the courts of the State of New Jersey, as described in the complaint;

 (3) Compelling the defendant to cancel of record any judgment which the defendant has or may hereafter recover in the State court proceedings against the plaintiff and the co-defendants in the state action upon the basis of said contract and requiring this defendant to make restitution to plaintiff and the other defendants in the State court proceedings with respect to any sums which defendant herein may collect under any judgment, and,

 (4) Permanently restraining and enjoining the defendant from instituting any further proceedings in any tribunal against the plaintiff or any one else seeking to enforce the said contract or to obtain any recovery thereon.

 The defendant attacked the complaint by way of a motion for summary judgment pursuant to Rules 56(b) *fn3" and 12(b) *fn4" of the Rules of Civil Procedure, 28 U.S.C., on the general ground that the complaint fails to state a claim upon which relief can be granted. Specifically, the defendant's arguments are based on the following points:

 (1) The covenant here involved being in reasonable restraint of trade is not therefore violative of the anti-trust acts of Congress.

 (2) The action is barred by principles of res adjudicata.

 (3) Plaintiff is otherwise estopped from maintaining the action by reason (a) unclean hands, (b) he is in pari delicto, (c) laches and (d) plaintiff was not damaged.

 (4) Plaintiff's cause is barred by the statute of limitations.

 (5) No monopoly is involved.

 (6) The complaint sets forth no cause of action.

 Plaintiff countered with his own motion for summary judgment arguing that the contract herein involved is illegal under the anti-trust laws, that the State court proceedings in no wise preclude this court from the exercise of its jurisdiction and that this court has the power to enjoin the State court proceedings.

 Both motions were argued upon voluminous affidavits, briefs and reply briefs filed by the parties. There seems to be no doubt that the controversy is disposable under the motions for summary judgment. For the most part there are no material issues of fact. Where conflicts seems to appear analysis discloses that either they were determined by the New Jersey courts or are of so little materiality or substance as to make further hearings upon them superfluous. Indeed, the record reveals rather clearly that the problem here is essentially one of applying legal standards to circumstances adequately before the court.

 It appears that the plaintiff is a resident of New Jersey and that defendant is a corporation of the State of Delaware, authorized to do business in New Jersey. From the age of 14 years plaintiff has been engaged in the fur dressing and dyeing industry. He is a grandson of Adolph Hollander, a founder of the defendant company, and his uncles, Ben, Albert and the late Michael Hollander, were the principal parties in interest in it at the time of the contractual relationship which is the subject of this suit. From 1921 to 1939 he was self-employed in the industry, engaged either individually or through corporations in which he had a proprietary interest and achieved a high standing in it as a skilled and talented dyer of various furs. In 1939 the corporation in which he and his brother were -co-owners failed and he sought employment in the defendant company by way of a proposal couched in the following language:

 'Newark, N.J., November 2, 1939

 'Mr. Michael Hollander, 'c/o A. Hollander & Son, Inc., 'newark, N.J. 'Dear Sir:

 'On Monday of this week I suggested to Al. Feldman that your company reopen the Long Branch plant. The conversation only covered the subject in a general way. Feldman called me on the telephone later in the day, and mentioned, that the suggestion I made 'in principle was acceptable.' It was decided that I submit a brief written outline of the proposal directly to you. 'Purpose

 'Under this proposal the Long Branch plant, would be devoted exclusively, to the dressing and dyeing of rabbitskins seal. Specialization has its advantages from both a technical and economical point of view. Sponsored by A.H. & S. this venture, with a product of substantial merit, would I am sure within a comparatively short space of time reach a commanding position in the trade. 'Product

 'The most important element in making this proposal profitable is, of course, the product. Today we are producing a seal-dyed rabbit that would meet every requirement you would demand. It is also important to know that the element of risk has, from a producing point of view, been almost entirely eliminated. This refers to damage allowances. I could go into a lengthy discussion on this subject, and would be very pleased to if you so request. It is my suggestion that 'two brands' should be established, one brand to provide for the volume business, and volume business is essential, and the other brand to provide for the so called better skin or buck. No attempt should be made to regulate the quality of the merchandise. The differential in price would do all the regulating we would require. After all our job is to do the dressing and dyeing and avoid all theories of merchandising. * * *


 'The volume brand should be able to command a price of 17 cents for dressing and dyeing. Under your sponsorship the better brand could be figured from 23 cents to 25 cents.

 'Indirect Charges

 'This is without question a very important item and should be placed on a very strict budget. * * *

 'Profits 'Estimating profits is always hazardous. From our own experience three million skins a year is not too much to expect. It is a conservative estimate. Proceeding on this basis the following will give a fairly accurate idea of what can be anticipated: * Average Selling price 17.5 ** Average Direct Cost 12.0 Gross Profit per skin 5.5 Gross Profit-three million 165,000.00 *** Deduct: Indirect Charges $ 60,000.00 Reserve for Bad Debts $ 5,250.00 Reserve for allowances $ 5,250.00 ////////-- Total Deductions... 70,500.00 "Net Profit $ 94,500.00 * "The average selling price of 17.5 cents is conservative. Under your sponsorship, it should be 10% higher. ** "This cost includes every conceivable direct charge, and is based on a labor situation similar to our present experience, although I feel labor would be somewhat cheaper in Long Branch than in Newark. "*** No provision was made here, for depreciation. Our own experience with losses due to bad debts has been negligible, less than the amount provided here.


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