Perma Life Mufflers, Inc. v. International Parts Corporation

PETITIONER: Perma Life Mufflers, Inc.
RESPONDENT: International Parts Corporation
LOCATION: Jewelry Store/Post Office Contract Station # 7

DOCKET NO.: 733
DECIDED BY: Warren Court (1967-1969)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 392 US 134 (1968)
ARGUED: Apr 22, 1968 / Apr 23, 1968
DECIDED: Jun 10, 1968

Facts of the case

Question

Media for Perma Life Mufflers, Inc. v. International Parts Corporation

Audio Transcription for Oral Argument - April 22, 1968 in Perma Life Mufflers, Inc. v. International Parts Corporation

Audio Transcription for Oral Argument - April 23, 1968 in Perma Life Mufflers, Inc. v. International Parts Corporation

Earl Warren:

Perma Life Mufflers, Incorporated, et al., petitioners versus International Parts Corporation, et al.

Mr. Rolnick, you may continue with your argument.

Robert F. Rolnick:

Mr. Chief Justice and may it please the Court.

At the time of the recess yesterday, I was at the point where I had described how the respondents had originated their franchise program and formulated a franchise agreement.

Pursuant to the terms of which, franchisees were required to maintain resale prices, purchased type products, deal exclusively with the franchisor and indeed it also provided that they were subject to certain other territorial restraints.

These provisions were backed up by a 30-day cancellation provision.

During the life of the franchisers in question, the franchisor enforced the terms of these agreements rigorously.

The details of that enforcement are set forth in our appendix beginning at page 175.

Indeed, the enforcement was so rigorous that the respondents terminated one of the petitioners herein after a series of warnings to him that he was not purchasing tail pipes, exhaust pipes and clamps which they sold from Midas, but was rather -- was instead purchasing them from competitors who offered these parts for sale and prices which were substantially below the prices at which respondent sold these products.

Indeed, during the course of those warnings, there was a colloquy between one of the principal officers of the respondents and this petitioner in which the principal officer said, “You know, your franchise is like a marriage.

This is like cheating on your wife and it is grounds for divorce,” referring to the fact that he had purchase from outside sources.

Following this termination, this petitioner, joined by the three other petitioners, initiated this action under Section 4 of the Clayton Act in United States District Court for the Eastern District of Illinois, Northern Division.

In that action, the petitioners alleged that they were injured as a result of having been compelled to adhere and adhere strictly to the restrictive provisions in these agreements.

They alleged that these restrictive provisions represented violations of Section 1 of the Sherman Act and Section 3 of the Clayton Act.

We submit that it was the plainest kind of error for the District Court to dismiss on a motion for summary judgment, this action which had been brought by these petitioners.

The District Court applied the doctrine of in pari delicto, the doctrine that these petitioners were at equal fault.

We believe that under the circumstances of this case, the in pari delicto doctrine is not applicable and indeed, we submit that the in pari delicto doctrine is not applicable to any action brought under Section 4 of the Clayton Act.

The doctrine is not applicable to the facts in this case when it is examined in light of the restrictions which the respondents imposed.

These restrictions were of no benefit to the respondents -- to the petitioners.

They were in fact of sole benefit, sole and exclusive benefit to the respondents.

It is difficult to imagine for example how the petitioners could have profited or benefited from the fact that they were forced, forced to pay more for parts which they purchased from the respondents and they would have paid -- had they purchased these parts from respondents competitors.

Potter Stewart:

Of the exclusive territories where some interest of -- some benefit of the petitioners, were they not?

Robert F. Rolnick:

The exclusive territories were of benefit to the extent that they authorized the petitioner to sell the respondents’ nationally advertised muffler.

Potter Stewart:

No competition in that territory?

Robert F. Rolnick:

With no competition in that territory.

On the other hand, in meeting out the territories, what the respondents did was limit the area within which the petitioner could sell this Midas muffler.

Now, one has to remember that these Midas mufflers were purchased by the petitioner and that this limitation on territory represented an alienation on the restraint -- an alienation restraining the territory within which these petitioners could sell merchandise which they had in fact purchased and paid for.

Potter Stewart:

So it goes the alleged antitrust violation.

I was simply directing myself to your statement that none of these things were of any benefit to the petitioners.

Robert F. Rolnick:

The purchase of the muffler was a benefit.