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Scooper Dooper Inc. v. Kraftco Corp.

decided: March 26, 1974.

SCOOPER DOOPER, INC., APPELLANT,
v.
KRAFTCO CORP., APPELLEE



APPEAL FROM THE ORDER OF THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA.

Biggs, Gibbons and Garth, Circuit Judges.

Author: Garth

Opinion OF THE COURT

GARTH, Circuit Judge.

Appellant Scooper Dooper, Inc. requests that this Court undertake a full-scale analysis of the antitrust implications of a qualified refusal to deal by Kraftco Corporation. Considerations of proper judicial administration require us to decline the invitation to measure Kraftco's conduct against the proscriptions of the Sherman Act. On the basis of collateral estoppel, we affirm the District Court's grant of summary judgment in favor of Kraftco.

I. PROCEDURAL HISTORY

Defendant-appellee Kraftco (formerly National Dairy Products) manufactures and distributes ice cream products under the trademarks of Sealtest and Breyers and also under private labels. Among its several plants, Kraftco operates Breyers Division processing factories in Long Island City (New York) and in Philadelphia. Kraftco's collective bargaining agreements with the New Jersey and New York locals of the Milk Drivers and Dairy Employees Union contain the following provision:

"The Company agrees for the term of this Agreement not to remove its manufacturing operations from the area of [the Local] and to continue to manufacture within the area of [the Local], and the Company, including any affiliates or subsidiaries, agrees that it shall not establish or operate a plant for production of ice cream or frozen dessert products outside of [the Local] area for sale or distribution of such products in the Metropolitan Area; . . . ."

The "Metropolitan Area" consists of New York City, the counties of Suffolk and Nassau in New York State, and the counties of Union, Essex, Bergen, Hudson, Passaic, Middlesex, Ocean, Somerset, Morris, Monmouth, Hunterdon, Sussex and Warren in New Jersey.

Plaintiff-appellant Scooper Dooper, Inc., a distributor of ice cream products, has found its business threatened by the above bargaining provision. Since 1963, Scooper Dooper distributed ice cream produced by Kraftco's Philadelphia plant to retailers in Delaware, Pennsylvania, and southern New Jersey. At some point in the late 1960's,*fn1 Scooper Dooper began selling this Philadelphia-based ice cream in northern New Jersey. Kraftco's New York and New Jersey unions, recognizing that this new policy meant that ice cream produced by Kraftco in Philadelphia would be sold within the Metropolitan Area, protested that their collective bargaining agreement with Kraftco had been violated. In 1969, the matter was submitted to arbitration. The arbitrator ruled that the new marketing policy violated the bargaining agreement and contravened the parties' intent to protect the labor standards achieved in the Metropolitan Area. The arbitrator ordered Kraftco to cease and desist from supplying products from its Philadelphia plant to Scooper Dooper for delivery in the Metropolitan Area.

Undaunted, Scooper Dooper and Kraftco sought (in the Southern District of New York) a declaratory judgment invalidating both the bargaining agreement and the arbitration award to the extent that they precluded Scooper Dooper from reselling Kraftco's Philadelphia ice cream in the Metropolitan Area. The co-plaintiffs argued that under the doctrine of United States v. Arnold, Schwinn & Company,*fn2 388 U.S. 365, 18 L. Ed. 2d 1249, 87 S. Ct. 1856 (1967), the exclusion of Kraftco's Philadelphia goods from the northern New Jersey market constituted a per se violation of Section 1 of the Sherman Act. District Judge Frankel disagreed. In National Dairy Products Corp. v. Milk Drivers & Dairy Employees Union, Local 680, 308 F. Supp. 982 (S.D.N.Y. 1970), Judge Frankel held that:

1) Schwinn was distinguishable, in that the plaintiffs before Judge Frankel had not alleged a conspiracy;

2) Schwinn was inapplicable, since territorial restrictions of the type discussed in Schwinn had not been imposed;*fn3 and

3) Even if the scheme were similar to that condemned in Schwinn, antitrust exemptions precluded interference by the judiciary.*fn4

Accordingly, Judge Frankel ordered Kraftco to stop selling its Philadelphia products to Scooper Dooper for resale in the Metropolitan Area.

Neither of the co-plaintiffs appealed Judge Frankel's decision.

Business relations between Kraftco and Scooper Dooper deteriorated after the above mentioned litigation. In response to measures allegedly taken by Kraftco to exclude appellant from the Metropolitan Area, Scooper Dooper resumed its practice of reselling Kraftco's Philadelphia ice cream in northern New Jersey. Kraftco, in February and March of 1971, warned Scooper Dooper that it would cease selling ice cream to Scooper Dooper if the latter continued to violate Judge Frankel's order. When Scooper Dooper failed to ...


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