Battle v. Lubrizol Corp., 80-538C(2).

• Decision Date: 11 May 1981
• Docket Number: No. 80-538C(2).,80-538C(2).
• Citation: 513 F. Supp. 995
• Parties: Jeffrey B. BATTLE et al., Plaintiffs, v. The LUBRIZOL CORPORATION et al., Defendants.
• Court: U.S. District Court — Eastern District of Missouri

513 F. Supp. 995

Jeffrey B. BATTLE et al., Plaintiffs, v. The LUBRIZOL CORPORATION et al., Defendants.

No. 80-538C(2).

United States District Court, E. D. Missouri, E. D.

May 11, 1981.

Paul H. Schramm, St. Louis, Mo., for plaintiffs.

C. William Portell, Jr., Walter M. Clark and Richard Wolff, St. Louis, Mo., for defendants.

MEMORANDUM

NANGLE, District Judge.

This case is now before the Court on the motion of defendant Lubrizol Corporation for summary judgment. The instant motion relates to Counts I and II of plaintiffs' complaint, the only counts in which Lubrizol is named as a defendant. In those counts, plaintiffs¹ allege that Lubrizol conspired with co-defendants Jenkin-Guerin, Inc., a competitor of plaintiffs in the rustproofing materials market and a customer of Lubrizol, and Jack Krause, Jenkin-Guerin's chief operating officer, to cut off plaintiffs' supply to Lubrizol's rustproofing compound, Lubrizol 2085A. Lubrizol allegedly refused to sell Lubrizol 2085A to plaintiffs at the behest of Jenkin-Guerin and Krause, in order to protect Jenkin-Guerin from price competition. These actions are allegedly violative of federal and state anti-trust laws, as well as common law.

Lubrizol's proof in support of the instant motion establishes that it initially decided to sell its rustproofing compound to plaintiffs after plaintiffs were recommended by Gordon Watson, a salesman for Jenkin-Guerin who subsequently left Jenkin-Guerin and joined Anchor Supply Co., Inc. In the negotiations leading to sales to plaintiffs, Jeffrey Battle represented to Lubrizol that he intended to market Lubrizol's product for marine applications, a previously untouched market. Lubrizol was satisfied with its distribution system as it related to the automotive rustproofing market, and would not have sold directly to plaintiffs had they merely sought to sell in that market. Battle's representation that he intended to pursue the marine market induced Lubrizol to sell directly to plaintiffs.

Lubrizol's decision to terminate plaintiffs as direct purchasers arises out of the foregoing factual background, none of which is seriously disputed by plaintiffs. After the initial sales of Lubrizol's product to plaintiffs, Lubrizol became aware that plaintiffs were not, in fact, pursuing the marine market. Lubrizol received calls from its co-defendants to this effect. Krause, in his capacity of chief operating officer of Jenkin-Guerin, complained to Lubrizol that plaintiffs were selling to Jenkin-Guerin's automotive customers at a price under that offered by Jenkin-Guerin. It is at this point that the parties' versions of the facts diverge.

Lubrizol contends, and has adequately supported this contention in the instant motion for summary judgment, that Krause's complaints about plaintiffs did not affect its decision to terminate its sales to plaintiffs. Lubrizol claims that plaintiffs were cut off because they were not pursuing the marine market as Lubrizol expected them to, and because Lubrizol considered Battle to have been untruthful in the negotiations leading up to the initial sales.

Plaintiffs, of course, contend otherwise. In support of their position that Lubrizol cut them off at its co-defendants' request due to plaintiffs' pricing policy, plaintiffs point to the admitted fact that Krause complained to Lubrizol about plaintiffs' competition and that plaintiffs were terminated shortly thereafter. Plaintiffs also rely on evidence to the effect that Krause had boasted to co-employees that he would force Lubrizol to cut off plaintiffs' supply, and that after phoning Lubrizol, Krause claimed to have arranged with Lubrizol to cut off plaintiffs.

A supplier is, of course, free to unilaterally choose with whom it will do business, United States v. Colgate & Co., 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992 (1919), and the Sherman Act does not infringe upon the supplier's right to unilaterally decide not to deal with a particular buyer. The decision not to deal with a particular buyer must, in fact, be unilateral, however; if the decision is made in agreement with others an anti-trust violation may be found. Cernuto, Inc. v. United Cabinet Corp., 595 F.2d 164 (3rd Cir. 1979); Oreck Corp. v. Whirlpool Corp., 579 F.2d 126 (2d Cir. 1978). Lubrizol argues that summary judgment is appropriate in the instant case since the undisputed evidence establishes that its decision to cut off plaintiffs was made unilaterally and for valid business reasons. This Court can not agree.

In ruling on the instant motion for summary judgment, this Court must resolve all factual disputes in favor of plaintiffs. Plaintiffs' evidence shows that Krause complained to Lubrizol about plaintiffs' competition and about their sales to Jenkin-Guerin's customers at prices lower than those offered by Jenkin-Guerin, and that Lubrizol cut off plaintiffs' supply shortly after these complaints. This evidence, standing alone, is not sufficient to withstand the instant motion for summary judgment. Sweeny & Sons, Inc. v. Texaco, Inc., 637 F.2d 105 (3rd Cir. 1980); Oreck Corp. v. Whirlpool Corp., 639 F.2d 75 (2d Cir. 1980); Carr Electronics Corp. v. Sony Corp. of America, 472 F.Supp. 9 (N.D.Cal.1979).

Plaintiffs do not rest on only this evidence, however. They have also shown that Krause said he intended to force Lubrizol to stop supplying plaintiffs with Lubrizol 2085A, and that after phoning Lubrizol, he boasted that he had done so. Lubrizol contends that even this evidence fails to establish concerted action on the part of the defendants. Though the evidence in this regard is slim and the requisite inference of concerted activity correspondingly great, this Court believes plaintiffs' evidence is sufficient to raise a jury question as to whether Lubrizol, in fact, acted unilaterally.

In any case in which a terminated buyer claims the termination was due to concerted action, there is likely to be no direct evidence of an agreement between the defendants. Rational businessmen simply do not put such agreements in writing. Absent a disillusioned ex-employee of one of the alleged conspirators who will testify to the alleged agreement, a terminated buyer must of necessity rely on circumstantial evidence to prove a conspiracy. The courts have held that termination following complaint by the competitors of the terminated buyer is not sufficient to allow an inference of conspiracy. Sweeny & Sons, Inc., supra; Oreck Corp. v. Whirlpool Corp., 639 F.2d 75 (2d Cir. 1980); Carr Electronics Corp., supra; cf. Girardi v. Gates Rubber Company Sales Division, Inc., 325 F.2d 196 (9th Cir. 1963). Even when not considering Krause's statements as proof of an actual conspiracy, the statements at least establish that Krause intended to reach an agreement with Lubrizol and thought that he had. Such evidence is obviously relevant to whether an agreement was actually reached. This Court believes this additional evidence is sufficient to allow an inference of concerted action.

Even assuming that this inference is allowable, however, Lubrizol contends that summary judgment is appropriate since plaintiffs can not show the necessary anti-competitive effect of the termination. A combination or agreement in restraint of trade is unlawful under the Sherman Act only if it unreasonably affects trade or commerce. Northern Pac. R. Co. v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958); Standard Oil Co. v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911). Under the "rule of reason" applied in such cases, it must be shown that the combination or agreement produced adverse, anti-competitive effects within the relevant product and geographic markets. Id. Some agreements or combinations are considered so lacking in redeeming virtue, however, that they are conclusively presumed illegal without inquiring into the actual effect on competition. Northern Pac. R. Co., supra. Such agreements are considered illegal per se.

Plaintiffs herein admit that they are unable to establish the anti-competitive effect necessary to prove a violation of the Sherman Act under the rule of reason. They contend, however, that they were terminated by Lubrizol to protect Jenkin-Guerin from price...