Opinion ID: 1476460
Heading Depth: 1
Heading Rank: 2

Heading: Contingent Liability for Unredeemed United Profit-Sharing Coupons.

Text: On this item the master charged against Doublemint gross profits $98,519.06, which the District Court increased by $64,715.60. With each 5-cent package of gum there was inclosed a profit-sharing coupon good for one-fifth of a cent, and also coupons of larger denomination with cartons of gum packages. The coupons were exchangeable either for cash or merchandise, and unlimited as to time of presentation. Many millions were put out each year. Their redeemability in articles of merchandise of various kinds was an incentive for saving them until sufficient quantities accumulated to effect a desirable exchange. Of course, many became lost and will never be redeemed. As to those actually redeemed, no question arises. The dispute comes respecting those not redeemed, which continue to be a potential liability of Wrigley, since Wrigley must pay the profit-sharing company on the basis of $3 for each 1,000 of one-fifth cent coupons presented. Evidence was offered of the experience of others who had for many years given out such coupons with their merchandise. There was evidence of very substantial redemptions for many years after their issuance. It appears that the government, in the computation of profits, allowed Wrigley 60 per cent. of the face value of the coupons issued in each year as fairly representing this liability. The master's allowance was based on a 33 1/3 per cent. of such redemption, which the District Judge raised by 5 per cent. From a careful review of the situation, we are satisfied that the percentage of redemption allowed by the court is still too low, and ought to be somewhat further increased. In our judgment an additional 6 2/3 per cent. over and above the further allowance by the District Court, making in all 45 per cent., probably would not overestimate Wrigley's ultimate liability upon the unredeemed coupons, and we are of opinion that this charge against Doublemint gross profits should be increased accordingly.