U.S. Supreme Court
Montague & Co. v. Lowry, 193 U.S. 38 (1904)
Montague & Company v. Lowry
Submitted October 27, 1903
Decided February 23, 1904
193 U.S. 38
An association was formed in California by manufacturers of, and dealers in, tiles, mantels and grates; the dealers agreed not to purchase materials from manufacturers who were not members and not to sell unset tiles to any one other than members for less than list prices which were fifty percent higher than the prices to members; the manufacturers, who were residents of states other than California, agreed not to sell to any one other than members; violations of the agreement rendered the member subject to forfeiture of membership. Membership in the association was prescribed by rules and dependent on conditions, one of which was the carrying of at least $3,000 worth of stock, and whether applicants were admitted was a matter for the arbitrary decision of the association. In an action by a firm of dealers in tiles, mantels, and grates in San Francisco whose members had never been asked to join the association and who had never applied for admission therein, and which did not always carry $3,000 worth of stock, to recover damages under § 7 of the Anti-Trust Act of July 2, 1890.
Held that, although the sales of unset tiles were within the State of California, and although such sales constituted a very small portion of the trade involved, agreement of manufacturers without the state not to sell to anyone but members was part of a scheme which included the enhancement of the price of unset tiles by the dealers within the state, and that the whole thing was so bound together that the transactions within the state were inseparable, and became a part of a purpose which, when carried out, amounted to, and was, a combination in restraint of interstate trade and chanroblesvirtualawlibrary
Held that the association constituted and amounted to an agreement or combination in restraint of trade within the meaning of the Act of July 2, 1890, and that the parties aggrieved were entitled to recover threefold the damages found by the jury.
Held that the amount of attorney's fees allowed as costs under the act is within the discretion of the trial court, and, as such discretion is reasonably exercised, this Court will not disturb the amount awarded.
This action was brought under section 7 of the Act of July 2, 1890, 26 Stat. 209, 3 Comp, Stat. 3202, commonly 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 person 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, 115 F. 27, affirming a judgment for plaintiffs, entered in the Circuit Court for the Northern District of California, upon a verdict of a jury. 106 F. 38.
It appeared in evidence on the trial in the United States circuit court that the plaintiffs, for many years prior to the commencement of this action, had been copartners, doing business as such in the City of San Francisco in the State of California, and dealing in tiles, mantels, and grates, and that the Tile, Mantel & Grate Association of California, and the officers and members thereof, had, since on or about the __ day of January, 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 Jose in the State of California, and such organization was also composed of the manufacturers of tiles, mantels, chanroblesvirtualawlibrary
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 manufacturers of tiles within the State of California, and all the defendants who were residents of that state and who were also dealers in tiles, in the prosecution of their business, 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 business which, with reference to the sales of tiles, amounted to commerce between the states. Under these circumstances, the dealers in tiles living in San Francisco or within a radius of 200 miles thereof, and being some of the defendants in this action, together with the eastern manufacturers of tile, who are named as defendants herein, formed an association called The Tile, Mantel & Grate Association of California. The objects of the association, as stated in the constitution thereof, were to unite all acceptable 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 frequent interchange of ideas, advance the interests and promote the mutual welfare of its members.
By its constitution, article I, section 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 established business and carrying not less than $3,000 worth of stock, and having been proposed by a member in good standing and elected, should, after having signed the constitution and bylaws governing the association, and upon the payment of an entrance fee as provided, enjoy all the privileges of membership. It was provided in the second section of the same article that all associated and individual manufacturers of tiles and fireplace fixtures throughout the United States might become nonresident members of the association upon the payment of an entrance fee as provided, and after having signed the constitution and bylaws governing chanroblesvirtualawlibrary
the association. The initiation fee was, for active members, $25, and for nonresident members $10, and each active 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 appointed whose duty it was to examine all applications for membership in the association and report on the same to the association. It does not appear what vote was necessary to elect a member, but it is alleged in the complaint that it required the unanimous consent of the association to become a member thereof, and it was further alleged that, by reason of certain business difficulties, there were members of the association 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 bylaws, after providing for the settlement of disputes between the members and their customers, by reason of liens, foreclosure 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 traveling agent of any manufacturer not a member 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 association, 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 California 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 chanroblesvirtualawlibrary
were more than fifty percent 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 subsequently joined the association. The plaintiffs 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 bylaws, supra, which was more than fifty percent over the price at which members of the association 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 defendants below that the condition of carrying $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 subject had ever been altered or repealed.
The jury rendered a verdict for $500 for the plaintiffs, and, pursuant to the provisions of the seventh section of the act, judgment for treble that sum, together with what the trial court decided to be a reasonable attorney's fee, was entered for the plaintiffs.