587 F.2d 127 (3rd Cir. 1978), 78-1094, Harold Friedman Inc. v. Thorofare Markets Inc.

Docket Nº:78-1094.
Citation:587 F.2d 127
Party Name:HAROLD FRIEDMAN INC., Appellant, v. THOROFARE MARKETS INC. and Union Real Estate Company.
Case Date:November 13, 1978
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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587 F.2d 127 (3rd Cir. 1978)

HAROLD FRIEDMAN INC., Appellant,

v.

THOROFARE MARKETS INC. and Union Real Estate Company.

No. 78-1094.

United States Court of Appeals, Third Circuit

November 13, 1978

Argued Sept. 6, 1978.

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[Copyrighted Material Omitted]

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Melvin L. Moser, Jr., Buchanan, Ingersoll, Rodewald, Kyle & Buerger, Pittsburgh, Pa., for appellant.

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Donald E. Seymour, Kirkpatrick, Lockhart, Johnson & Hutchison, Pittsburgh, Pa., for appellee, Thorofare Markets, Inc.

David R. Levin, Pittsburgh, Pa. for appellee, Union Real Estate Co.

Before SEITZ, Chief Judge, and ADAMS and ROSENN, Circuit Judges.

OPINION

ADAMS, Circuit Judge.

This is an appeal from a grant of summary judgment in an antitrust suit brought by the owner of a supermarket against its principal competitor and against the managing agent of a shopping center, alleging a combination by them to eliminate plaintiff from the shopping center. The district court held that the jurisdictional requirement that there be a substantial effect on interstate commerce had not been satisfied, and that in any event the action was barred under the applicable statute of limitations. Because we disagree with both conclusions reached by the trial court, and inasmuch as we deem summary judgment inappropriate under the circumstances, we shall direct that the district court's order be vacated.

I.

Plaintiff, Harold Friedman, Inc. (Friedman), operates seven "Foodland" supermarkets in the Butler County area of Pennsylvania under a franchise from Fox Grocery Company. Defendant Thorofare Markets, Inc. (Thorofare), owns and operates a chain of approximately seventy-five supermarkets in Pennsylvania, West Virginia and Ohio. Since at least 1956, defendant Union Real Estate Co. (Union) has acted as the managing and leasing agent for the owners of the Bon Aire Shopping Center, located in Butler County.

Thorofare opened a supermarket at the Bon Aire Shopping Center in 1949. In 1954, Thorofare moved from the area that it had occupied to larger premises in the same shopping center. Thereafter, Thorofare's lease was amended on May 14, 1956, to include a provision prohibiting the leasing of any part of Bon Aire Shopping Center or adjacent property owned by the lessor to a chain supermarket that would compete with Thorofare. 1

The area that Thorofare had vacated was rented to Friedman in 1957 under a fifteen-year lease expiring June 30, 1972. Thorofare expressly authorized the lease, and reference was made to such authorization in Friedman's lease. 2 In the ensuing years Friedman and Thorofare competed vigorously with one another.

When its lease at the Bon Aire Shopping Center expired in 1968, Thorofare was permitted to continue its tenancy on a monthly basis, while Union negotiated with both Thorofare and Friedman with respect to the premises occupied by Thorofare. Union sought a major financial commitment toward renovating the premises from the potential lessee. Thorofare obtained the new lease on July 30, 1971, and in return for its financial undertaking, it was granted the right to exclude from the Bon Aire Shopping Center all competitors, including Friedman, after June 30, 1974. This exclusivity right resembled similar provisions that Thorofare had secured in most of its leases at other locations. On November 16,

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1971, Friedman was given a two-year extension of its Bon Aire lease, to run from July 1, 1972 through June 30, 1974.

The parties disagree as to when Friedman became apprised of Thorofare's exclusivity right. Thorofare contends that Friedman knew, at least constructively, by November, 1971, and that the purpose of the two-year extension of Friedman's lease was to permit Friedman sufficient time to relocate its Bon Aire unit. 3 Friedman's board chairman, on the other hand, testified in a deposition that he had not been aware of the exclusivity provision in the Thorofare lease until late 1973 or early 1974. Further, he stated that he had been continually assured by Union until late 1973 that Friedman's lease would be renewed. 4

At some point, Friedman began searching for a more spacious site to which it might relocate its establishment, and it finally settled on a location at a shopping center about one and one-half miles north of Bon Aire. Construction plans were drawn up by the end of 1972, but unanticipated factors delayed completion of the new store. In May, 1974, Friedman requested a four-month extension of its Bon Aire lease. Union relayed the request to Thorofare, and Thorofare declined to waive its exclusivity right. As a result, Friedman was required to vacate in August, 1974, the premises which it had been occupying in Bon Aire. Further delays in completing the new supermarket prevented Friedman from entering into possession there until November, 1975.

Friedman initiated this lawsuit on June 29, 1976, in the district court for the Western District of Pennsylvania. In its complaint it asserted that Thorofare and Union had abridged § 1 of the Sherman Act, 15 U.S.C. § 1, and pended to this federal cause of action various state claims for tortious interference by the defendants with Friedman's business relations. 5

Thorofare and Union moved for summary judgment on the alternative grounds that (1) the district court lacked subject matter jurisdiction because the alleged conduct of the defendants was not sufficiently related to interstate commerce to come within the scope of the Sherman Act; (2) the alleged conduct did not constitute a violation of the Sherman Act; and (3) the Sherman Act claim was time-barred under the governing four-year statute of limitations.

The district court granted defendants' motions for summary judgment. Although the trial judge specifically based his decision only on grounds (1) and (3), he extensively discussed and accepted defendants' position concerning ground (2) as well. Since he concluded that there was no federal question or diversity jurisdiction, the trial judge also dismissed the pendent state law claims.

II.

A motion for summary judgment is properly granted only if the record shows "that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." 6 The burden is on the moving party to demonstrate that the test is met, and the non-moving party is entitled to the benefit of all reasonable doubts and inferences that may arise in connection with the consideration of such motion. 7 In applying this standard to the issues in the present case, we are mindful of the Supreme Court's admonition in a celebrated antitrust case that "(t)rial by

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affidavit is no substitute for trial by jury which so long has been the hallmark of 'even handed justice.' " 8

  1. INTERSTATE COMMERCE

    Section 1 of the Sherman Act prohibits every contract, combination or conspiracy "in restraint of trade or commerce among the several states." 9 To satisfy the requisite jurisdictional element interstate commerce 10 the allegedly illegal conduct must constitute "either (1) activities that are in the flow of interstate commerce, or (2) activities which though occurring purely on a local level substantially affect interstate commerce." 11 Substantiality of effect under the second test is to be viewed on a case-by-case, practical economic basis, from the perspective of whether the local activity has a significant impact on competition in commerce and whether the commerce so affected is substantial in volume. 12 Once a material effect on interstate commerce is demonstrated, however, "no specific magnitude (of reduced interstate commerce) need be proved." 13 In fact, the jurisdictional requirement is satisfied even if interstate commerce is increased by the anticompetitive conduct. 14 Consequently, in determining whether the restrictive covenant and its enforcement in the present case substantially affect commerce, we may consider the interstate ties of Thorofare's Bon Aire supermarket which stands to gain by the grant of exclusivity in addition to the interstate connections of Friedman's store.

    Plaintiff adduces the following facts in support of its assertion that the alleged combination to eliminate it from Bon Aire substantially affected interstate commerce by reducing the interstate flow of goods to Friedman while increasing the flow to Thorofare:

    Friedman's sales at Bon Aire during 1973, the last full year of its operations there, amounted to $849,162. Approximately 20% Of this volume represents revenue from the

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    sale of meats, some of which Friedman obtained from out-of-state suppliers. At least 1% Of Friedman's sales were of products that it purchased directly from out-of-state sellers. Also, Friedman purchased 60% Of its merchandise from its franchisor, and a high percentage of these goods had an out-of-state source. Thorofare's sales at Bon Aire increased from $1,723,450 during the fiscal year ending July 31, 1974 the last year it competed with Friedman to $2,268,859 during the following fiscal year. Fifty-five per cent of the goods sold at that location had been transported across state lines from a company distribution center in Youngstown, Ohio. In addition, Thorofare obtained $322,000 for remodeling its Bon Aire supermarket from earnings generated in Pennsylvania, West Virginia and Ohio. Moreover, the exclusivity clause in the Bon Aire lease, which was a feature sought and obtained by Thorofare in nearly every one of its supermarket leases, has in fact been enforced against a potential tenant from Kansas.

    The district court relied on a number of lower court cases 15 to conclude "(w)ithout much discussion" that Friedman had not shown "a reduced flow of goods in interstate commerce." 16 These cases, which dealt...

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