Hanover Shoe, Inc. v. United Shoe Machinery Corporation

PETITIONER: Hanover Shoe, Inc.
RESPONDENT: United Shoe Machinery Corporation
LOCATION: Seward High School

DOCKET NO.: 335
DECIDED BY: Warren Court (1967-1969)
LOWER COURT: United States Court of Appeals for the Third Circuit

CITATION: 392 US 481 (1968)
ARGUED: Mar 05, 1968
DECIDED: Jun 17, 1968

Facts of the case

Question

Media for Hanover Shoe, Inc. v. United Shoe Machinery Corporation

Audio Transcription for Oral Argument - March 05, 1968 in Hanover Shoe, Inc. v. United Shoe Machinery Corporation

Earl Warren:

Number 699 -- no. Number 335, Hanover Shoe Company Incorporated, petitioner versus United Shoe Machinery Corporation, and number 463, United Shoe Machinery Corporation, petitioner versus Hanover Shoe Incorporated.

Mr. Hayes.

James V. Hayes:

Mr. Chief Justice and may it please the Court.

We are concerned here with the case of Hanover, a manufacturer of men's shoes brought against the defendant, United for damages occasioned by United's monopolization of the shoe machinery trade.

Hanover leased from United all of the machines involved in this case at least which is needed in the manufacture of its shoes.

There were no comp -- machines, comparable in quality with the United's machines which were available from any other domestic or foreign source.

The District Court undisturbed by the Court of Appeals found that United's monopoly position was from 89% to 100% of the 20 most important machines which accounted for 80% of the royalties which Hanover paid United, and it's monopoly position was from 85% to 100% of all but six of the machines and there were a total of 58 which Hanover rented from United.

Now, all of those machine types were available to Hanover from United solely on a lease only basis.

In 1947, the government brought an action against United and I shall refer to that action as the government action.

In that action, the District Court held that United's lease only policy, the provisions of its leases and related sales policies or related policies having to do with its relations with its customers were exclusionary and illegal.

And it held on the basis of its findings that United had monopolized the shoe machinery trade.

Now, in the course of this argument I am going to use the shorthand phrase, leasing system to describe the leases and the bundle of policies which were condemned by the District Court in the government action.

On the basis of its decision, the Court in the government action enjoined the leasing system and directed that, from the date to be fixed, United should offer no machine of those involved for lease unless it also offered it for sale.

The decision of the District Court in the government's action as Your Honors well know was affirmed by this Court in a per curiam decision.

The decree in the government action was offered and received in evidence by the District Court below.

The District Court below in arriving at its findings and conclusions relied on that decree on the findings and conclusions of the Court in the government action and also an additional proof of monopolization which Hanover offered at the trial.

With respect to damages, Hanover offered two kinds of proof.

It's first kind of proof what the District Court refers to as a primary claim, consisted of a comparison between the rentals which United actually -- I mean, which Hanover, pardon me, actually paid to United and what it would have cost Hanover if it had owned the machines and met the necessary ownership cost, that was one method.

The second method was based on 19 instances which we found in the evidence in the record in the government action, instances where United had reduced its rents and royalties on machines when it was faced with competition, with respect to those machines and I might mention though that a matter purely of interest that the percentage reductions ranged from 11% to 82% and averaged out at 43%.

The District Court held that with respect to that evidence which was tendered to show excessiveness in the rents and royalties themselves, the plaintiff, Hanover had failed to prove excessiveness.

United in its briefs consistently asserts that its rents and royalties have been held reasonable.

There is no such holding by the District Court in this case or by the District Court in the government action.

The holding was that Hanover failed to prove excessiveness which is somewhat different.

The District Court, however, in this action found that under Hanover's primary proof, the comparison of leasing with ownership cost, Hanover had demonstrated that it had been damaged in the sum of $1,413,000.

That is what had cost Hanover to lease the machines over and above what it would have cost Hanover if it have had the opportunity in a free market to buy the machines.

On United's appeal to the Court of Appeals, Third Circuit, that Court affirmed with respect to all claims, all questions having to do with liability.

And United's appeal to that Court presented every question that's involved in the conditional cross petition here.

It did, however, order a new trial, limited to damages on two grounds.

The first of these grounds is that the award of damages should be reduced by the so called tax benefits, tax disadvantages that ownership would entail to it as I understand the opinion that if Hanover had been the owner, it would not have had the advantage, it did have as lessee in that as lessee.

It was able to deduct all its rents and royalties on its tax returns.