Vendo Co. v. Lektro-Vend Corp.

433 U.S. 623 (1977)

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Nature of the Case

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Facts

The Illinois state-court litigation arose out of commercial dealings between P and Stoner (D). In 1959 P, a vending machine manufacturer acquired most of the assets of Stoner Manufacturing, which was thereupon reorganized as respondent Stoner Investments, Inc. Stoner Manufacturing had engaged in the manufacture of vending machines that dispensed candy. As part of the acquisition agreement Stoner (D) was to refrain from owning or managing any business engaged in the manufacture or sale of vending machines. Pursuant to an employment contract, Stoner (D) was employed by P as a consultant for five years at a salary of $50,000, and he agreed that during the term of his contract and for five years thereafter he would not compete with P in the business of manufacturing vending machines. In 1965, P sued Ds in state court for breach of these non-competition covenants. D then sued P in alleging that P had violated §§ 1 and 2 of the Sherman Act. Ds alleged that the covenants against competition were unreasonable restraints of trade because they were not reasonably limited as to time and place and that the purpose of P's state-court lawsuit was to 'unlawfully harass' Ds and to 'eliminate the competition.' Ds set up this federal antitrust claim as an affirmative defense to P's state-court suit. Prior to any ruling by the state courts on the merits of this defense, Ds voluntarily withdrew it. Eventually, in September 1974, the state courts affirmed a judgment in favor of P and against Ds in an amount exceeding $7 million. It held that Stoner (D) had breached a fiduciary duty owed to P, rather than upon any breach of the non-competitive covenants. During this time frame, Ds' antitrust suit in the District Court was allowed to lie 'dormant.' When the state court denied a stay of execution pending petition for certiorari to the Supreme Court of Illinois, Ds moved in the District Court for a preliminary injunction against collection of the state judgment. The District Court granted the motion. The court held that the noncompetition covenants were overly broad. The District Court held that the injunctive-relief provision of the Clayton Act, 15 U.S.C. § 26, constitutes an express exception to 28 U.S.C. § 2283, the 'Anti-Injunction Act.' The Court of Appeals affirmed, finding that § 16 of the Clayton Act was an express exception to § 2283. P appealed. P contends that principles of equity, comity, and federalism, as well as the Anti-Injunction Act, barred the issuance of the injunction by the District Court.