decided as amended february 6 1976.: December 24, 1975.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA C.A. No. 70-1461.
Van Dusen, Adams and Hunter, Circuit Judges.
Plaintiffs, a corporation that deals in scientific instruments, and its president, brought an antitrust suit alleging that the practices of a manufacturer had illegally restricted their business opportunities and ultimately resulted in the termination of the dealership, causing damages to both the corporation and its president.*fn1 After trial before a jury, a verdict for $825,000 was returned which was trebled by the trial court, and an attorney's fee was awarded.
The manufacturer brings this appeal, asserting a series of contentions concerning the standing of the officer to sue, the proof of liability for the various antitrust violations set forth, the conduct of the trial, and the appropriate measure of damages in the event that liability was properly found. The manufacturer also complains about the amount of the attorney's fee that was awarded and about the absence of an adequate explanation for such fee.
I. BACKGROUND OF THE SUIT.
Pitchford Scientific Instruments Corporation (Pitchford Scientific), a Pennsylvania corporation, and Arthur H. Pitchford, president and holder of all but one per cent of the stock of Pitchford Scientific, are the plaintiffs in this action. Mr. Pitchford and Pitchford Scientific will both be referred to as Pitchford, except where necessary to distinguish their separate claims. The defendants are North American Philips Corporation (NAP), Philips Electronic Instruments (PEI), and Philips Electronics & Pharmaceutical Industries (PEPI).*fn2 All the defendants will be referred to as PEI.
PEI markets three lines of sophisticated electronic instruments for industrial and scientific use: scientific and analytical, industrial, and medical. The alleged antitrust violations arose from Pitchford's handling of the scientific-analytical and industrial lines under an annual dealership contract with PEI. The dealership contract contained a clause allowing PEI to cancel the arrangement at any time, upon thirty days' notice to Pitchford. PEI exercised this option, and the Pitchford dealership came to an end on September 10, 1970.
In its complaint, filed December 24, 1970, Pitchford claimed that PEI had violated both the Sherman and Clayton Acts by policies designed to implement price-fixing, exclusive dealing, full-line forcing, and territorial sales restraints. The plaintiffs asserted that such conduct caused injury to them while Pitchford Scientific acted as a dealer for PEI and, further, resulted in the eventual termination of the dealership.*fn3
Trial began on February 26, 1974, and in response to special interrogatories a verdict against PEI was returned on March 29, 1974. The verdict of $825,000 was divided as follows: $550,000 was awarded to Pitchford Scientific for the counts dealing with price-fixing, full-line forcing, exclusive dealing, and territorial restrictions;*fn4 $72,000 was awarded Mr. Pitchford for substantially the same violations; and $203,000 was awarded Pitchford Scientific for damages resulting from the termination of the dealership. The $825,000 figure was trebled by the trial judge to $2,475,000.
On June 26, 1974, the court denied PEI's motions for a judgment notwithstanding the verdict and for a new trial. The court then awarded plaintiffs an attorney's fee in the amount of $645,250. On November 20, 1974, the trial judge denied PEI's motion for alteration of this award.
PEI appeals on six grounds:
1. It was entitled to a directed verdict because Mr. Pitchford lacked standing to sue as an individual, Pitchford failed to prove PEI's liability for price-fixing, exclusive dealing, full-line forcing, or territorial restraints, and there was no proof that the cancellation of the Pitchford dealership was related to any of the alleged antitrust violations.
2. In any event, PEI is entitled to a new trial because Pitchford introduced prejudicial material, improper hearsay, and inadmissible opinion evidence. In addition, PEI urges that a new trial is necessary since a considerable portion of the questioning by Pitchford's counsel regarding price-fixing was deliberately misleading and because Pitchford's counsel made improper remarks in his opening and closing arguments.
3. The evidence introduced by Pitchford on its lost profits and the value of the terminated dealership was improper.
4. The inclusion of the full-line forcing count in the special interrogatories to the jury was improper, since the count had been dismissed by the judge during the trial.
5. The charge was inadequate to guide the jury in properly applying the relevant law to the facts of the case.
6. The award of counsel fees was excessive and a proper predicate for such fees was not set forth.
In response, Pitchford contends that we should sustain the judgment based on the jury's verdict and uphold the award of attorney's fees.
We affirm in part, reverse in part, vacate in part, and remand.
II. MR. PITCHFORD'S STANDING TO SUE.
At trial Mr. Pitchford claimed that he was entitled to damages, because of income that he had lost as a result of the various restraints by PEI on Pitchford Scientific. Mr. Pitchford also sought to recover the salary he lost as president of another firm, not a party to this action, Pitchford Manufacturing. It was alleged that from 1962 to 1968 PEI obstructed the development by Pitchford Manufacturing of Portaspec, a product Mr. Pitchford was eager to place on the market. In addition to the award to Pitchford Scientific, the jury awarded $72,000 to Mr. Pitchford for his personal claims.
On appeal, Mr. Pitchford contends that, even without considering the Portaspec issue, he would be justified in recovering an amount "at least equal to his average annual earnings of $57,000 per year between 1967 and 1970." Mr. Pitchford does not point to anything in the record to justify this particular measure of damages.
PEI, however, asserts that Mr. Pitchford had no standing to sue and that, consequently, the jury award to Mr. Pitchford as an individual was improper. Since the record indicates that PEI's business was conducted with Pitchford Scientific and not with Mr. Pitchford personally, any injury under the alleged violations, PEI argues, was suffered by that corporation alone.
There is no proof that any of the restraints were directed against Mr. Pitchford individually as a shareholder or as an officer of either Pitchford Scientific or Pitchford Manufacturing. Consequently, any harm to Mr. Pitchford would have to flow derivatively from injuries done the companies of which he was a shareholder and an officer.*fn5
This Court has adopted the precept that "the language [in section 4 of the Clayton Act] does not include indirect harm that the individual may [have suffered] as a stockholder through injury inflicted upon the corporation."*fn6 As this Court noted as early as 1910:
Certainly it is not apparent that [the Sherman Act] was intended to or did confer upon hundreds of thousands of stockholders individual rights of action when the wrongs could have been equally well and more economically be redressed by a single unit in the name of the corporation.*fn7
Hence, Mr. Pitchford in his capacity as shareholder is without standing.
A denial of standing applies with equal force to Mr. Pitchford in his status as an officer of Pitchford Scientific.*fn8 Mr. Pitchford alleged that his salary as president of the firm was less than it would have been had the firm been able to market electronic instruments free of the restrictions imposed by PEI. Mr. Pitchford cannot, however, obtain standing merely by shifting profit from his shareholder pocket to his officer pocket.
Moreover, salaries of corporate officers are not necessarily tied to corporate profits; other factors may weigh in the balance. To permit suits by officers for salaries lost in consequence of antitrust violations on the basis of facts such as were presented here would open the door to conjectural damage claims. Mere assertion of a relation between corporation losses and officers' salaries without more does not provide the foundation necessary to establish standing to sue. If his salary as president is not simply the reverse side of his earnings as principal shareholder of the company, any reduction in his salary attributable to PEI's practices is too far removed along the causal chain to entitle Mr. Pitchford to standing.
The same reasoning applies to Mr. Pitchford's standing as an officer of Pitchford Manufacturing. While the corporation might have a cause of action on the basis of the facts alleged here, the corporation's president can have no standing to sue in these circumstances.
Accordingly, based on the facts present here, Mr. Pitchford is without standing to sue as an individual, and all portions of the judgment granting recovery to Mr. Pitchford personally must be reversed.
PEI's pricing policy was formulated by a committee consisting of its director of marketing, its chief financial officer, and its general manager. The committee promulgated a price list for sales of PEI's product to the public by its dealers and company-owned branch outlets, and a code indicating a discount at which the dealers could purchase the equipment from PEI. If, for a particular transaction, a dealer considered that the specified discount was not sufficient to make the sale profitable, the dealer could request a sales allowance beyond the normal discount.
Publishing list prices and establishing a program under which dealers may obtain extra discount, PEI argues, is perfectly proper. Mr. Pitchford, however, testified that PEI not only issued a suggested list price, but also exercised extensive control over prices. Any variance by a dealer from the list price, Mr. Pitchford stated, required approval by the pricing committee. Mr. Pitchford's testimony was supported by a PEI document, mailed to dealers and branches in 1969, which stated that any deviation by the dealer from the list price was to be approved by at least one member of the pricing committee.
There was evidence that PEI enforced its pricing policy. In connection with a sale to the Magee-Women's Hospital in 1969, Pitchford requested permission to sell below PEI's list price. According to Mr. Pitchford, PEI's director of marketing, Robert Deichert, was "very emphatic that under no circumstances could [Pitchford] cut the price." Deichert finally agreed that Pitchford would sell at list, and then make a separate grant to the hospital. PEI proceeded quietly to pay Pitchford a portion of the grant. Although Pitchford was not permitted to sell a line of Pye Unicam equipment at less than list price, a subsequent sale of such equipment to the Magee-Women's Hospital was consummated when Pitchford agreed to supply the hospital certain spare parts at no cost.
Sufficient evidence was presented to support a finding by the jury that PEI's pricing policies constituted a violation of section 1 of the Sherman Act. If there is no applicable fair trade legislation, resale price maintenance is per se illegal.*fn9 The only way a supplier such as PEI may permissibly influence resale prices is by an announcement of its preferred retail pricing policy. A supplier may not go beyond such an announcement to control the retail pricing practices of those to whom it passes dominion and control over its goods.*fn10
The memorandum defining the role of PEI's pricing committee indicates that the committee's purpose was not only to supervise branch sale prices but to supervise dealer sale prices as well. The pricing committee policed both branch and dealer practices in the same manner, and PEI's intention with respect to the Magee-Women's Hospital sales could reasonably have been perceived to be that any Pitchford price concession not undermine PEI's list price policy. Accordingly, there was enough evidence for the jury to find the intent requisite to the antitrust violation.*fn11
A plaintiff, however, must establish both that the antitrust laws were violated and that it has suffered "fact of damage" in consequence of that violation in order to establish a cause of action in a private antitrust suit.*fn12 There is not enough evidence here to sustain the jury's finding that during the four-year statutory damage period*fn13 there was damage from such a violation.
As the Supreme Court stated in Zenith Radio Corp. v. Hazeltine Research, Inc., "the burden of proving fact of damage under section § 4 of the Clayton Act is satisfied by proof of some damage flowing from the unlawful conspiracy . . .."*fn14 It would have been sufficient if the wrongful acts had a tendency to injure Pitchford's business and if there had been introduced evidence of a decline in the value of Pitchford's profits that was not shown to be attributable to causes other than the antitrust violation. Pitchford, however, conformed to PEI's policies and there was no evidence relating the termination of ...