Perma Life Mufflers, Inc. v. International Parts Corp.

392 U.S. 134 (1968)

Facts

International (D) created the 'Midas' trade name and established a nation-wide chain of dealers who would specialize in selling exhaust system equipment. The agreement obligated the dealer to purchase all his mufflers from Midas, to honor the Midas guarantee on mufflers sold by any dealer, and to sell the mufflers at resale prices fixed by Midas and at locations specified in the agreement. The dealers were also obligated to purchase all their exhaust system parts from Midas, to carry the complete line of Midas products, and in general to refrain from dealing with any of Midas' competitors. In return, D promised to underwrite the cost of the muffler guarantee and gave the dealer permission to use the registered trademark 'Midas' and the service mark 'Midas Muffler Shops.' Each dealer had the exclusive right to sell 'Midas' products within his defined territory. There was no franchise fee or capital equipment purchase requirement. The agreement was cancelable by either party on 30 days' notice. P signed a dealer agreement. P's complaint detailed the numerous provisions of the agreements, such as the terms barring them from purchasing from other sources of supply, preventing them from selling outside the designated territory, tying the sale of mufflers to the sale of other products in the Midas line, and requiring them to sell at fixed retail prices. D refused to modify the agreement and had threatened to terminate Ps' agreements if they failed to comply. Ps claimed treble damages for the monetary loss they had suffered from having to abide by the restrictive provisions. The District Court entered summary judgment for D on all of Ps’ claims. The Court of Appeals reversed the judgment on the Robinson-Patman claim, but affirmed the District Court's ruling that the other claims were barred by the doctrine of in pari delicto. The court noted that Ps had enthusiastically sought to acquire a Midas franchise with full knowledge of these provisions and had 'solemnly subscribed' to the agreement containing the restrictive terms. Ps had all made enormous profits as Midas dealers, had eagerly sought to acquire additional franchises, and had voluntarily entered into additional franchise agreements, all while fully aware of the restrictions they now challenge. P appealed and the Supreme Court granted certiorari.