Union Processing Corporation v. Atkin, 83-723
| Decision Date | 21 February 1984 |
| Docket Number | No. 83-723,83-723 |
| Citation | 465 U.S. 1038,79 L.Ed.2d 712,104 S.Ct. 1316 |
| Parties | UNION PROCESSING CORPORATION v. Morris ATKIN et al |
| Court | U.S. Supreme Court |
On petition for writ of certiorari to the Court of Appeals of New York.
The petition for writ of certiorari is denied.
Petitioner, Union Processing Corporation (Union), operates a scrap-metal business in Auburn, New York. Respondents, Morris, Sol, and Samuel Atkin (Atkins), are in the same business in Rochester. Both Union and Atkins purchase and process scrap metal and then sell the processed metal to steel mills and foundries. In 1974, Union and Atkins independently decided to establish metal-shredding operations in Rochester. Steel mills prefer shredded metal because shredding allows the separation of ferrous and non-ferrous scrap, yielding a cleaner grade of scrap. When Union learned that Atkins had entered into a purchase contract for a shredder, it initiated negotiations to ensure that there would be only one shredding operation in Rochester. The parties agreed that there were not enough raw materials in the area to support two shredding operations. Ultimately, they agreed that Atkins would assign the purchase contract to Union in return for 2% of Union's gross sales for the next seven years. Within two years, Union ceased making payments under the contract.
Atkins brought suit in October 1978 for payments due under the contract. Union argued that the contract was unenforceable because part of the consideration for the contract consisted of an oral promise by Atkins not to operate a shredder in the Rochester area. Such an agreement, Union contended, violates § 1 of the Sherman Act, 15 U.S.C. § 1.
The trial court found that the oral agreement not to compete was indeed a part of the contract. It concluded that since the agreement constituted a horizontal division of territories, it was a per se violation of the Sherman Act.
On appeal, the Appellate Division of the New York Supreme Court rejected Union's contention that since the contract constituted a horizontal division of markets it was per se illegal under § 1 of the Sherman Act. The court reasoned that the rule of per se illegality is applicable only if the entire geographic market is divided. It found that the relevant geographic market in this case consisted of the entire area in which steel mills purchase the end product produced by the shredder. Because only the Rochester area was allocated, the court concluded that a rule-of-reason analysis was appropriate. Using that analysis, the court found the impact of the agreement on competition to be minimal because Atkins could operate a shredder anywhere in the relevant geographic market outside of Rochester.
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