37 F.3d 996 (3rd Cir. 1994), 92-1762, Alvord-Polk, Inc. v. F. Schumacher & Co.

Docket Nº:92-1762.
Citation:37 F.3d 996
Party Name:ALVORD-POLK, INC.; American Blind Factory, Inc.; Delta Paint and Wallpaper Supply Co., Inc.; Fairman Wallpaper and Paint Company; Frank R. Yocum, t/a Frank R. Yocum & Sons Wallpaper Co.; Harry's Wallpaper, Inc.; Lancaster Carpet Market, Inc.; Marvin Kolsky, t/a Headquarters Windows & Walls; Silver Wallpaper & Paint Co., Inc.; Yankee Wallcoverings,
Case Date:October 12, 1994
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

Page 996

37 F.3d 996 (3rd Cir. 1994)

ALVORD-POLK, INC.; American Blind Factory, Inc.; Delta

Paint and Wallpaper Supply Co., Inc.; Fairman Wallpaper and

Paint Company; Frank R. Yocum, t/a Frank R. Yocum & Sons

Wallpaper Co.; Harry's Wallpaper, Inc.; Lancaster Carpet

Market, Inc.; Marvin Kolsky, t/a Headquarters Windows &

Walls; Silver Wallpaper & Paint Co., Inc.; Yankee

Wallcoverings, Inc., Appellants,


F. SCHUMACHER & CO.; The National Decorating Products

Association, Inc., Appellees.

No. 92-1762.

United States Court of Appeals, Third Circuit.

United States Court of Appeals, Third Circuit

October 12, 1994

Argued March 17, 1993.

Opinion Vacated Sept. 15, 1993.

Submitted Pursuant to LAR 34.1(a) On Panel Rehearing Oct. 25, 1993 [*].

Sur Petitions for Rehearing Nov. 15, 1994.

Page 997

[Copyrighted Material Omitted]

Page 998

Steven A. Asher (argued), Kohn, Nast & Graf, Philadelphia, PA, for appellants, Alvord-Polk, Inc.; American Blind Factory, Inc.; Delta Paint and Wallpaper Supply Co., Inc; Frank R. Yocum, t/a Frank R. Yocum & Sons Wallpaper Co.; Harry's Wallpaper, Inc.; Lancaster Carpet Market, Inc.; Marvin Kolsky, t/a Headquarters Windows & Walls;

Page 999

Silver Wallpaper & Paint Co., Inc.; Yankee Wallcoverings, Inc.

Michael S. Lando (argued), Pittsburgh, PA, for appellant, Fairman Wallpaper and Paint Co.

Margaret M. Zwisler (argued), Howrey & Simon, Washington, DC, for appellee, F. Schumacher & Co.

Richard D. Lageson (argued), Gino F. Battisti, Suelthaus & Kaplan, P.C., St. Louis, MO, for appellee, The National Decorating Products Ass'n, Inc.

Before: STAPLETON, ROTH and LEWIS, Circuit Judges.


LEWIS, Circuit Judge.

For over a decade, retailers who market wallpaper by providing sample books and showroom displays have feuded with dealers who sell at a discount through toll-free "1-800" telephone numbers. In this case, ten 800-number dealers have accused the retailers' trade association and one of the leading wallpaper manufacturers of violating antitrust laws in an attempt to force them out of business. The district court granted summary judgment to the defendants on these and certain state-law claims. We will reverse the grant of summary judgment as to some federal and state antitrust claims but will affirm as to others and as to the 800-number dealers' tort claims.


Our review of a grant of summary judgment is plenary; we evaluate the evidence using the same standard the district court was to have applied in reaching its decision. Big Apple BMW, Inc. v. BMW of North America, Inc., 974 F.2d 1358, 1362 (3d Cir.1992); J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524, 1530 (3d Cir.1990); Erie Telecommunications, Inc. v. City of Erie, 853 F.2d 1084, 1093 (3d Cir.1988). Plaintiffs have alleged three theories of antitrust liability under the Sherman Act, 15 U.S.C. Sec. 1 (the "Act"). A brief review of the Act and its purposes informs our determination of the standard to be applied on summary judgment.


Section 1 of the Sherman Act provides:

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal[.]

15 U.S.C. Sec. 1. The very essence of a section 1 claim, of course, is the existence of an agreement. Indeed, section 1 liability is predicated upon some form of concerted action. 1 Fisher v. Berkeley, 475 U.S. 260, 266, 106 S.Ct. 1045, 1049, 89 L.Ed.2d 206 (1986); Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 767-69, 104 S.Ct. 2731, 2739-41, 81 L.Ed.2d 628 (1984); United States v. Colgate & Co., 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992 (1919); Big Apple BMW, 974 F.2d at 1364. See also Weiss v. York Hospital, 745 F.2d 786, 812 (3d Cir.1984) (section 1 claim requires proof of three elements, the first of which is "a contract, combination or conspiracy"); Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105, 110 (3d Cir.1980) ("[u]nilateral action, no matter what its motivation, cannot violate [section] 1"). A " 'unity of purpose or a common design and understanding or a meeting of minds in an unlawful arrangement' " must exist to trigger section 1 liability. Copperweld, 467 U.S. at 771, 104 S.Ct. at 2742, quoting American Tobacco Co. v. United States, 328 U.S. 781, 810, 66 S.Ct. 1125, 1139, 90 L.Ed. 1575 (1946). See also Fisher, 475 U.S. at 267, 106 S.Ct. at 1049-50; Sweeney, 637 F.2d at 111.

The requirement is an important one, for it emphasizes the distinction between section 1 liability, which is imposed for concerted action in restraint of trade, and liability imposed under section 2 of the Sherman Act for monopolization. See Copperweld, 467

Page 1000

U.S. at 767, 104 S.Ct. at 2739-40. Activity which is alleged to have been in violation of section 1 may be subject to a per se standard and engender liability without inquiry into the harm it has actually caused. See Copperweld, 467 U.S. at 768, 104 S.Ct. at 2740. See generally Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717, 723, 108 S.Ct. 1515, 1519, 99 L.Ed.2d 808 (1988). Alternatively, section 1 liability might be imposed for concerted action which violates the "rule of reason" standard without proof that it threatened monopolization. Copperweld, 467 U.S. at 768, 104 S.Ct. at 2740.

Congress treated concerted action more strictly than unilateral behavior because

[c]oncerted activity inherently is fraught with anticompetitive risk. It deprives the marketplace of the independent centers of decisionmaking that competition assumes and demands. In any conspiracy, two or more entities that previously pursued their own interests separately are combining to act as one for their common benefit. This not only reduces the diverse directions in which economic power is aimed but suddenly increases the economic power moving in one particular direction. Of course, such mergings of resources may well lead to efficiencies that benefit consumers, but their anticompetitive potential is sufficient to warrant scrutiny even in the absence of incipient monopoly.

Id. at 768-69, 104 S.Ct. at 2740. For this reason, when we examine an alleged violation of section 1 of the Sherman Act, we look for an agreement that "brings together economic power that was previously pursuing divergent goals." Id. at 769, 104 S.Ct. at 2741. A lack of such divergent goals precludes officers of a single company from conspiring. Neither internally coordinated conduct of a corporation and its unincorporated division, nor activity undertaken jointly by a parent corporation and its wholly owned subsidiary, can form the bases of section 1 violations. Id. at 769-71, 104 S.Ct. at 2740-42.

An agreement need not be explicit to result in section 1 liability, Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 59-60, 31 S.Ct. 502, 515-16, 55 L.Ed. 619 (1911), quoted in Copperweld, 467 U.S. at 785, 104 S.Ct. at 2749 (Stevens, J., dissenting), and may instead be inferred from circumstantial evidence. Theatre Enterprises, Inc. v. Paramount Film Distributing Corp., 346 U.S. 537, 540-41, 74 S.Ct. 257, 259-60, 98 L.Ed. 273 (1954); Sweeney, 637 F.2d at 111; Milgram v. Loew's, Inc., 192 F.2d 579, 583 (3d Cir.1951). Therefore, direct evidence of concerted action is not required.

In this case, the parties contest the propriety of summary judgment on the issue of concerted action in each of three different alleged fact patterns. Before addressing each fact pattern, we turn to a review of the summary judgment standard applicable to antitrust cases.


A district court may enter summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The substantive law determines which facts are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).

A party moving for summary judgment need not produce evidence to disprove its opponent's claim. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986), but it does bear the burden of demonstrating the absence of any genuine issues of material fact. Big Apple BMW, 974 F.2d at 1362. As in this case, when the nonmoving party will bear the burden of proof at trial, the moving party may meet its burden by showing that the nonmoving party has failed to produce evidence sufficient to establish the existence of an element essential to its case. Celotex, 477 U.S. at 322, 106 S.Ct. at 2552.

In reviewing the evidence, facts and inferences must be viewed in the light most favorable to the party opposing summary judgment. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).

Page 1001

When the moving party has pointed to material facts tending to show there is no genuine issue for trial, however, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts.... Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.' " Matsushita, 475 U.S. at 586-87, 106 S.Ct. at 1356.

This traditional summary judgment standard applies with equal force in antitrust cases, Eastman Kodak Co. v. Image Technical Services, Inc., --- U.S. ----, ----, 112 S.Ct. 2072, 2083, 119 L.Ed.2d 265, 285 (1992); Big Apple BMW, 974 F.2d at 1362-63; however, the meaning we ascribe to circumstantial evidence will vary depending upon the challenged conduct.

For example, evidence of conduct which is "as consistent with permissible competition as with illegal conspiracy," without more, does...

To continue reading