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KATINSKY v. RADIO SHACK DIV. OF TANDY CORP.

July 24, 1980

Jack D. KATINSKY, d/b/a Cherry Hill Radio Shack, Richard S. Vlock, Walter Steigerwald, Mayfair-Oakland Corporation, and Joseph Frumkin, Plaintiffs,
v.
RADIO SHACK DIVISION OF TANDY CORPORATION, Defendant



The opinion of the court was delivered by: SAROKIN

Plaintiff in this action is Jack D. Katinsky, operator of the Radio Shack store in the Ellisburg Circle Shopping Center in Cherry Hill, New Jersey. Defendant, Radio Shack, Division of the Tandy Corporation, is a manufacturer and seller of electronic audio equipment.

The complaint alleges seven causes of action: first, the provisions of the Agreement that give Radio Shack control over the merchandise sold in the store and prices at which the merchandise is sold violate section 1 of the Sherman Act; second, Radio Shack has monopolized or attempted to monopolize in violation of section 2 of the Sherman Act and the New Jersey Antitrust Act; third, the "return on investment" charge provided for in the Agreement is an illegal brokerage or commission under section 2(c) of the Robinson-Patman Act; fourth, the opening of three Radio Shack stores by Radio Shack within five miles of the Ellisburg store violates oral assurances allegedly given plaintiff by a Radio Shack representative at the time plaintiff commenced operation of the Ellisburg store; fifth, Radio Shack has violated the Agreement in that it provides that Radio Shack will consult with plaintiff Katinsky with respect to "local advertising"; sixth, Radio Shack has violated the Agreement by improperly calculating plaintiff's share of the profits from the store; seventh, Radio Shack has failed to supply advertised merchandise to the store in violation of the New Jersey Consumer Frauds Act.

 In this action, defendant Radio Shack has moved for partial summary judgment with respect to claims 1, 3, 4, 6, and 7. At oral argument, partial summary judgment was granted in favor of the defendant with respect to claims 3 and 7.

 FACTUAL BACKGROUND

 Plaintiff Katinsky entered into a new Radio Shack management program known as a "joint venture". Designed to relate a store manager's compensation directly to his or her ability to generate sales, the program offered the opportunity of achieving a higher income than would normally be paid to a store manager. Under the Agreement, Radio Shack and Katinsky were entitled to take an equal share of the gross profits earned by the store after certain agreed-upon deductions. An agreement was reached, and the store opened a few days later. A written agreement was subsequently executed between the parties later that month.

 The responsibilities with respect to the operation of the store are as follows: store premises are provided at a suitable location, operating expenses such as rent, taxes and insurance are the responsibility of Radio Shack, while in-store operating expenses, such as utilities, salaries and general upkeep are the responsibility of plaintiff; Radio Shack supplies all the store inventory and determines the merchandising policies of the store; plaintiff had delivered a fully refundable security deposit of $ 12,500; Radio Shack establishes store policies with the exception of hiring, firing, compensating and supervising any personnel working in the store; Radio Shack retains title to the store fixtures, leasehold improvements, inventory, patents, trademarks, trade names, and service names; Radio Shack is responsible for insurance on the buildings, fixtures, and inventory, while plaintiff is liable only for willful or negligent conduct to the extent not covered by insurance.

 With respect to termination, the agreement provides that such may be accomplished by both parties (a) upon 90 days' written notice without cause; and (b) immediately and without notice, upon a breach of contract or commission of a "dishonest act" by the other party. Additionally, Radio Shack may terminate the contract without notice, if plaintiff fails to observe the operating policies and merchandising policies the company has established.

 Shortly after the joint venture relationship began, Radio Shack decided to discontinue that particular mode of operation. Radio Shack was able to induce most of the other store managers operating under the program to convert to other programs. The plaintiff continued to operate under the terms of the Agreement, although Radio Shack had notified plaintiff that in accordance with the terms of the Agreement they wished to terminate. Plaintiff thereafter filed suit to enjoin the termination under the New Jersey Franchise Practices Act. The state court found that, for purposes of the New Jersey Franchise Practices Act, Katinsky was a "franchisee" who could not be terminated without good cause. Plaintiff has continued to operate the Ellisburg store.

 VIOLATION OF SECTION ONE OF THE SHERMAN ACT

 A. Collateral Estoppel

 Plaintiff argues that the defendant is collaterally estopped from relitigating the issue of section 1 jurisdiction since the New Jersey Superior Court determined that the plaintiff was a Radio Shack franchisee within the meaning of the New Jersey Franchise Practices Act.

 There are four requirements which must be met before collateral estoppel effect can be given to a prior action: (1) the issue sought to be precluded must be the same as that involved in the prior action; (2) that issue must have been actually litigated; (3) it must have been determined by a valid and final judgment; and (4) the determination must have been essential to the prior judgment. Haize v. Hanover Co., 536 F.2d 576, 579 (3d Cir. 1976); Lynne Carol Fashions, Inc. v. Cranston Printworks Co., 453 F.2d 1177 (3d Cir. 1972).

 The requirement of identical issues has not been met. The issue sought to be precluded herein was not the same as that involved in the prior action. Although the New Jersey Superior Court examined many of the same facts in order to reach a decision with respect to whether or not the plaintiff was a franchisee within the New Jersey Franchise Practices Act, the issue which was presented to that court is different from the issue before this Court. It was not necessary for the New Jersey court to determine whether the plaintiff was an "independent step" in the distribution process under the Sherman Act. That court made no determination which could collaterally estop this ...


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