W.W. Montague & Co. v. Lowry, 194 U.S. 38

W. MONTAGUE & CO., a Corporation, et al., Plffs. in Err. v.

EDWARD S. LOWRY et al.

(See S. C. Reporter’s ed. 38-48.)

Anti-trust act — combination in restraint of trade — association of manufacturers and wholesalers — attorney’s fee.

mantels, and grates in San Francisco and vicinity, and nonresident manufacturers of tiles and fireplace fixtures, in which the deal¬ ers agree not to purchase from manufacturers not members of the association, and not to sell unset tile to nonmembers for less than list prices, which are more thhn 50 per cent higher than prices to members, while the manufacturers agree not to sell their prod¬ ucts or wares to nonmembers at any price, under penalty of forfeiture of membership, is an agreement or combination in restraint of trade within the meaning of the anti-trust act of July 2, 1890 (26 Stat. at L. 209, chap. 647, U. S. Comp. Stat. 1901, p. 3202).

anti-trust act of July 2, 1890 (26 Stat. at L. 209, chap. 647, U. S. Comp. Stat. 1901, p. 3202), § 7, to allow a reasonable attorney’s fee to the successful plaintiff in an action brought under that section to recover dam¬ ages for a violation of the provisions of that act against combinations in restraint of trade, is not abused by an allowance of $750, al¬ though the verdict was for but $500, where the trial took five days, and from the proof offered it appeared that from $750 to $1,000 would he a reasonable sum.

[No. 4G.]

Submitted October 27, 1903. Decided Feb¬ ruary 23, 190 If.

1 N ERROR to the United States Circuit Court of Appeals for the Ninth Circuit to review a judgment which affirmed a judg¬ ment of the Circuit Court for the Northern District of California entered upon a ver-

Note. — On contracts in restraint of trade; monopolies — see notes to Leslie v. Lorrillard, 1 L. R. A. 456 ; People v. North River Sugar Ref. Co. 2 L. R. A. 33 ; Bowman v. Phillips, 3 L. R. A. 632 ; Richardson v. Buhl, 6 L. R. A. 457 ; People ex ret. Peabody v. Chicago Gas Trust Co. 8 L. R. A. 500 ; People v. North River Sugar Ref. Co. 9 L. R. A. 37 ; National Benefit Co. v. Union Hospital Co. 11 L. R. A. 437 ; Lovejoy v. Michels, 13 L. R. A. 770 ; Fowle v. Park, 33 L. ed. U. S. 67 ; United States v. Trans-Missouri Freight Asso. 41 L. ed. U. S. 1007 ; and Cravens v. Carter-Crume Co. 34 C. C. A. 486.

193 U. S.

W. W. Montague & Co. v. Lowry.

39-41

diet in favor of plaintiffs in an action to recover damages for the violation of the provisions of the anti trust act against com¬ binations in restraint of trade. Affirmed.

See same case below, 52 C. C. A. 621, 115 Fed. 27.

Statement by Mr. Justice Peckham:

This action was brought under § 7 of the act of July 2, 1890 (26 Stat. at L. 209, chap. 647, U. S. Comp. Stat. 1901, p. 3202), com¬ monly called the anti-trust act. The section reads as follows:

“Sec. 7. Any person who shall be injured in his business or property by any other per¬ son or corporation by reason of anything forbidden or declared to be unlawful by this act, may sue therefor in any circuit court of the United States in the district in which the defendant resides or is found, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the costs of suit, including a reasonable attorney’s fee.”

Plaintiffs in error (defendants below) seek to review the judgment of the circuit court of appeals for the ninth circuit (52 C. C. A. 621, 115 Fed. 27), affirming a judg¬ ment for plaintiffs, entered in the circuit court for the northern district of California, upon a verdict of a jury. 106 Fed. 38.

It appeared in evidence on the trial in the United States circuit court that the plain¬ tiffs for many years prior to the commence¬ ment of this action had been copartners, do¬ ing business as such in the city of San Fran¬ cisco in the state of California, and dealing in tiles, mantels, and grates, and that the Tile, Mantel, & Grate Association of Cali¬ fornia, and the officers and members thereof, had since on or about the — day of Janu¬ ary, 1898, constituted under that name an unincorporated organization composed of wholesale dealers in tiles, mantels, and grates, who were citizens and residents of the city and county of San Francisco, or the city of Sacramento, or the city of San Jos6 in the state of California, and such organi¬ zation was also composed of the manufactur¬ ers of tiles, mantels, *and grates, who were residents of other states, and engaged in the sale of their manufactured articles (among others) to the various other defendants in the state of California. There were no man¬ ufacturers of tiles within the state of Cali¬ fornia, and all the defendants who were res¬ idents of that state and who were also deal¬ ers in tiles, in the prosecution of their busi¬ ness, procured the tiles from outside the state of California and from among those manufacturers who were made defendants herein. The manufacturers and dealers were thus engaged in the prosecution of a busi¬ ness which, with reference to the sales of 193 U. S.

tiles, amounted to commerce between the states. Under these circumstances the deal¬ ers in tiles, living in San Francisco, or with¬ in a radius of 200 miles thereof, and being some of the defendants in this action, to¬ gether with the eastern manufacturers of tile, who are named as defendants herein, formed an association called The Tile, Man¬ tel, & Grate Association of California. The objects of the association, as stated in the constitution thereof, were to unite all ac¬ ceptable dealers in tiles, fireplace fixtures, and mantels in San Francisco and vicinity (within a radius of 200 miles) and all American manufacturers of tiles, and by fre¬ quent interchange of ideas advance the in¬ terests and promote the mutual welfare of its members.

By its constitution, article I., § 1, it was provided that any individual, corporation, or firm engaged in or contemplating engaging in the tile, mantel, or grate business in San Francisco, or within a radius of 200 miles thereof (not manufacturers), having an es¬ tablished business and carrying not less than $3,000 worth of stock, and having been pro¬ posed by a member in good standing and elected, should, after having signed the con¬ stitution and by-laws governing the asso¬ ciation, and upon the payment of an en¬ trance fee as provided, enjoy all the privi¬ leges of membership. It was provided in the second section of the same article that all associated and individual manufactur¬ ers of tiles and fireplace fixtures throughout the United States might become nonresident members of the association upon the pay¬ ment of an entrance fee as provided, and aft¬ er having signed the constitution and by¬ laws governing *the association. The initia-

tion fee was, for active members, $25, and for nonresident members $10, and each ac¬ tive member of the association was to pay $10 per year as dues, but no dues were charged against nonresidents.

An executive committee was to be ap¬ pointed whose duty it was to examine all applications for membership in the associa¬ tion and report on the same to the asocia- tion. It does not appear what vote was necessary to elect a member, but it is al¬ leged in the complaint that it required the unanimous consent of the association to be¬ come a member thereof, and it was further alleged that by reason of certain business difficulties there were members of the asso¬ ciation who were antagonistic to plaintiffs, and who would not have permitted them to join if they had applied, and that plaintiffs were not eligible to join the association for the further reason that they did not carry at all times stock of the value of $3,000.

The by-laws, after providing for the settle¬ ment of disputes between the members and

609

41, 43

Supreme Court of the United States.

Oct. Term,

their customers, by reason of liens, fore¬ closure proceedings, etc., enacted as follows, in article III.:

“Sec. 7. No dealer and active member of this association shall purchase, directly or indirectly, any tile or fireplace fixtures from any manufacturer or resident or trav¬ eling agent of any manufacturer not a mem¬ ber of this association, neither shall they sell or dispose of, directly or indirectly, any unset tile for less than list prices to any person or persons not a member of this as¬ sociation, under penalty of expulsion from the association.

“Sec. 8. Manufacturers of tile or fireplace fixtures or resident or traveling agents of manufacturers selling or disposing, directly or indirectly, their products or wares to any person or persons not members of the Tile, Mantel, & Grate Association of Cali¬ fornia, shall forfeit their membership in the association.”

The term “list prices,” referred to in the seventh section, was a list of prices adopted by the association, and when what are called “unset” tile were sold by a member to any one not a member, they were sold at the

list prices so adopted, which *were more than 50 per cent higher than when sold to a member of the association.

The plaintiffs had established a profitable business and were competing with all the defendants who were dealers, and engaged in the business of purchasing and selling tiles, grates, and mantels in San Francisco prior to the formation of this association. The plaintiffs had also before that time been accustomed to purchase all their tile from tile manufacturers in eastern states (who were also named as parties defendant in this action), and all of those manufacturers sub¬ sequently joined the association. The plain¬ tiffs were not members of the association and had never been, and had never applied for membership therein, and had never been invited to join the same.

The proof shows that by reason of the formation of this association the plaintiffs have been injured in their business, because they were unable to procure tile from the manufacturers at any price, or from the dealers in San Francisco, at less than the price set forth in the price list mentioned in the seventh section of the by-laws, supra, which was more than 50 per cent over the price at which members of the associa¬ tion could purchase the same. Before the formation of the association the plaintiffs could and did procure their tile from the manufacturers at much less cost than it was possible for them to do from the dealers in San Francisco after its formation.

There was proof on the part of the defend¬ ants below that the condition of carrying 610

$3,000 worth of stock, as mentioned in the constitution, had not always been enforced, but there was no averment or proof that the article of the constitution on that sub¬ ject had ever been altered or repealed.

The jury rendered a verdict for $500 for the plaintiffs, and, pursuant to the provi¬ sions of the seventh section of the act, judg¬ ment for treble that sum, together with what the trial court decided to be a reason¬ able attorney’s fee, was entered for the plaintiffs.

Mr. William M. Pierson submitted the cause for plaintiffs in error:

It is lawful for a man to decline to work for another man or cla.s of men, or to do business witli another man or class of men, as he sees fit; and what is lawful for one man to do in this regard, several men may agree to act jointly in doing, and may make express and simultaneous declaration of their purpose.

Hopkins v. United States, 171 U. S. 578, 43 L. ed. 290, 19 Sup. Ct. Rep. 40; Ander¬ son v. United States, 171 U. S. 604, 43 L. ed. 300, 19 Sup. Ct. Rep. 50; United States v. Oreenhut, 51 Fed. 205; Re Greene, 52 Fed. 104; United States v. Nelson, 52 Fed. 646; Dueber Watch Case Mfy. Co. v. E. How¬ ard Watch ct- Clock Co. 55 Fed. 851, 14 C. C. A. 14, 35 U. S. App. 16, 66 Fed. 637 ; Gibbs v. McNeeley, 102 Fed. 594; Mogul S. S. Co. v. McGregor, L. R. 23 Q. B. 598 ; Bohn Mfg. Co. v. Hollis, 54 Minn. 223, 21 L. R. A. 337, 40 Am. St. Rep. 319, 55 N. W.

The transactions in unset tile at list prices, being purely local, are not within the purview of the act of Congress.

Addyston Pipe it- Steel Co. v. United States, 175 U. S. 211, 44 L. ed. 136, 20 Sup. Ct. Rep. 96.

Transactions which are related to inter¬ state trade or commerce only in a trifling, incidental, or remote way will not operate to bring an agreement or association within the interdict of the act of Congress.

United States v. Trans-Missouri Freight Asso. 166 U. S. 290, 41 L. ed. 1007, 17 Sup. Ct. Rep. 540; United States v. Joint Traf¬ fic Asso. 171 U. S. 505, 43 L. ed. 259, 19 Sup. Ct. Rep. 25; Hopkins v. United States, 171 U. S. 578, 43 L. ed. 290, 19 Sup. Ct. Rep. 40; Anderson v. United States , 171 U, S. 604, 43 L. ed. 300, 19 Sup. Ct. Rep. 50.

Mr. Joseph C. Campbell submitted the cause for defendants in error. Messrs. Camp¬ bell, Metson <l; Campbell were on his brief:

The anti-trust, act was designed to solve an economic problem which industrial com¬ bination had produced, and to maintain an economic condition of free competition,

193 U. S.

W. W. Montague & Co. v. Lowry.

44-40

which the spirit of our laws has always jealously guarded.

United States v. Trans-Missouri Freight Asso. 166 U. S. 260, 323, 41 L. ed. 1007, 1021, 17 Sup. Ct. Rep. 540; Addyston Pipe & Steel Go. v. United States, 175 U. S. 211, 244, 44 L. ed. 136, 149, 20 Sup. Ct. Rep.

Contracts to buy, sell, or exchange goods to be transported among the several states, the transportation and its instrumentalities, and articles bought, sold, or exchanged for the purposes of such transit among the states, or put in the way of transit, may be regulated, because they form a part of in¬ terstate trade or commerce.

United Slates v. E. C. Knight Co. 156 U. S. 1, 13, 39 L. ed. 325, 329, 15 Sup. Ct. Rep. 249; Addyston Pipe d Steel Co. v. United States, 175 U. S. 211, 241, 44 L. ed. 136, 148, 20 Sup. Ct. Rep. 96 ; Hopkins v. Unit¬ ed States, 171 U. S. 578, 597, 43 L. ed. 290, 298, 19 Sup. Ct. Rep. 40.

The Tile, Mantel, & Grate Association of California is in restraint of trade or com¬ merce among the several states, and was formed to, and does, monopolize such trade or commerce.

United States v. Coal Dealers’ Asso. 85 Fed. 252.

In order to vitiate a contract or combina¬ tion, it is not essential that its results should be a complete monopoly; it is suffi¬ cient if it really tends to that end and to deprive the public of the advantages which flow from free competition.

United States v. E. C. Knight Co. 156 U. S. 1, 16, 39 L. ed. 325, 331, 15 Sup. Ct. Rep. 249.

Mr. Justice Peckham, after making the foregoing statement, delivered the opinion of the court:

The question raised by the plaintiffs in error in this case is, whether this associa¬ tion, described in the foregoing statement of facts, constituted or amounted to an agree¬ ment or combination in restraint of trade within the meaning of the so-called anti¬ trust act of July 2, -1890?

The result of the agreement when carried out was to prevent the dealer in tiles in San Francisco, who was not a member of the association, from purchasing or procur¬ ing the same upon any terms from any of the manufacturers who were such members, and all of those manufacturers who had been accustomed to sell to the plaintiffs

were members. The nonmember *dealer was also prevented by the agreement from buy¬ ing tiles of a dealer in San Francisco who was a member, excepting at a greatly en¬ hanced price over what he would have paid to the manufacturer or to any San Francis- 103 U. S.

co dealer who was a member, if he, the pur¬ chaser, were also a member of the associa¬ tion. The agreement, therefore, restrained trade, for it narrowed the market for the sale of tile in California from the manufac¬ turers and dealers therein in other states, so that they could only be sold to the mem¬ bers of the association, and it enhanced prices to the nonmember as already stated.

The plaintiffs endeavored in vain to pro¬ cure tilo for the purposes of their business from these tile manufacturers, but the lat¬ ter refused to deal with them because plain¬ tiffs were not members of the association.

It is not the simple case of manufacturers of an article of commerce between the sev¬ eral states refusing to sell to certain other persons. The agreement is between manu¬ facturers and dealers belonging to an asso¬ ciation in which the dealers agree not to purchase from manufacturers not members of the association, and not to sell unset tile to anyone not a member of the asso¬ ciation for less than list prices, which are more than 50 per cent higher than the prices would be to those who were members, while the manufacturers who became mem¬ bers agreed not to sell to anyone not a member, and in case of a violation of the agreement they were subject to forfeiting their membership. By reason of this agree¬ ment, therefore, the market for tile is, as we have said, not only narrowed, but the prices charged by the San Francisco deal¬ ers for the unset tile to those not members of the association are more than doubled.

It is urged that the sale of unset tile, pro¬ vided for in the seventh section of the by¬ laws, is a transaction wholly within the state of California and is not in any event a violation of the act of Congress which ap¬ plies only to commerce between the states.

The provision as to this sale is but a part of the agreement, and it is so united with the rest as to be incapable of separation without at the same time altering the gen¬ eral purpose of the agreement. The whole agreement is to be construed as *one piece, in

which the manufacturers are parties as well as the San Francisco dealers, and the refus¬ al to sell on the part of the manfacturers is connected with and a part of the scheme which includes the enhancement of the price of the unset tile by the San Francisco deal¬ ers. The whole thing is so bound together that when looked at as a whole the sale of unset tile ceases to be a mere transaction in the state of California, and becomes part of a purpose which, when carried out, amounts to and is a contract or combina¬ tion in restraint of interstate trade or com¬ merce.

Again, it is contended the sale of unset tile is so small in San Francisco as to be

611

46-48

Supreme Court of the U kited States.

Oct. Term,

a negligible quantity; that it does nol amount to 1 per cent of the business of the dealers in tile in that city. The amount of trade in the commodity is not very material, but even though such dealing heretofore has been small, it would probably largely in¬ crease when those who formerly purchased tile from the manufacturers are shut out by reason of the association and their nonmem¬ bership therein from purchasing their tile from those manufacturers, and are com¬ pelled to purchase them from the San Fran¬ cisco dealers. Either the extent of the trade in unset tile would increase between the members of the association and outsiders, or else the latter would have to go out of bus¬ iness, because unable to longer compete with their rivals who were members. In either event, the combination, if carried out, di¬ rectly effects a restraint of interstate com¬ merce.

It is also contended that, as the expressed object of the association was to unite there¬ in all the dealers in San Francisco and vi¬ cinity, the plaintiffs had nothing more to do than join the association, pay their fees and dues, and become like one of the other members. It was not, however, a matter of course to permit any dealer to join. The constitution only provided for “all accept¬ able dealers” joining the association. As plaintiffs were not invited to be among its founders, it would look as if they were not regarded as acceptable. However that may be, they never subsequently to its forma¬ tion applied for admission. It is plain that the question of their admission, if they had

so applied, was one to be arbitrarily *deter- mined by the association. The constitu¬ tion provided for the appointment of an ex¬ ecutive committee, whose duty it was to ex¬ amine all applications for membership in and to report on the same to the associa¬ tion, after which it was to decide whether the applicants should be admitted or not. If they were not acceptable, the applicant would not be admitted, and whether they were or not was a matter for the arbitrary decision of the association. Its decision that they were not acceptable was sufficient to bar their entrance.

Again, it appears that plaintiffs were not eligible under the constitution because they did not always carry stock worth $3,000, which, by § 1 of article I., was made a con¬ dition of eligibility to membership. True, it was stated in evidence that this provision had not been enforced, but there was no averment or proof that it had been repealed, and there was nothing to preyent its en¬ forcement at any time that an application was made by anyone who could not come up to the condition. The case stands, there¬ fore, that the plaintiffs had not been asked 612

to join the association at its formation; that they did not All the condition provided for in its constitution as to eligibility, and that if they had applied their application was subject to arbitrary rejection.

The plaintiffs, however, could not, by vir¬ tue of any agreement contained in such as¬ sociation, be legally put under obligation to become members in order to enable them to transact their business as they had there¬ tofore done, and to purchase tile as they had been accustomed to do before the asso¬ ciation was formed.

The consequences of nonmembership were grave, if not disastrous, to the plaintiffs.

It has already been shown how the prices of tile were enhanced so far as plaintiffs were concerned, and how, by means of this com¬ bination, interstate commerce was affected.

The purchase and sale of tile between the manufacturers in one state and dealers therein in California was interstate com¬ merce within the Addy stone Pipe Case, 175 U. S. 211, 44 L. ed. 136, 20 'Sup. Ct. Rep.

among manufacturers simply, but one be¬ tween them and dealers in the manufactured article, *wliich was an article of commerce

between the states. United States v. E. C. Knight Co. 156 U. S. 1, 39 L. ed. 325, 15 Sup. Ct. Rep. 249, did not, therefore, cover it.

It is not brought within either Hopkins v. United States, 171 U. S. 578, 43 L. ed. 290,

19 Sup. Ct. Rep. 40, or Anderson v. United States, 171 U. S. 604, 43 L. ed. 300, 19 Sup.

Ct. Rep. 50. In the first case it was held that the occupation of the members of the association was not interstate commerce, and in the other that the subject-matter of the agreement did not directly relate to, em¬ brace, or act upon interstate commerce, for the reasons which are therein stated at length. Upon examination we think it is entirely clear that the facts in the case at bar bear no resemblance to the facts set forth in either of the above cases and are not within the reasoning of either. The agreement directly affected and restrained interstate commerce.

The ease we regard as a plain one and it is unnecessary to further enlarge upon it.

There is one other question which, al¬ though of secondary importance, is raised by the plaintiffs in error. After the rendi¬ tion of the verdict the plaintiffs below claimed a reasonable attorney’s fee under the seventh section of the act, and made proof of what would be a reasonable sum therefor, from which it appeared that it would be from $750 to $1,000. The trial court awarded to the plaintiffs $750. The verdict being only for $500, the plaintiffs in error claimed that the allowance was an im¬ proper and unreasonable one. The trial took

193 XI. S.

some five days. The judgment in effect pro¬ nounced the association illegal. The amount of the attorney’s fee was within the discretion of the trial court, reasonably ex¬ ercised, and we do not think that in this case such discretion was abused.

The judgment is affirmed.

[49]* AMERICAN BOOK COMPANY, Plff. in