THI-Hawaii, Inc. v. First Commerce Financial Corp.

• Citation: 627 F.2d 991
• Decision Date: 15 September 1980
• Docket Number: No. 78-1302,INC,THI-HAWAI,78-1302
• Parties: 1980-2 Trade Cases 63,550 , a Hawaii Corporation, Plaintiff-Appellant, v. FIRST COMMERCE FINANCIAL CORPORATION, a Nevada Corporation, and Ellaric Corporation, a Hawaii Corporation, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 991

627 F.2d 991

1980-2 Trade Cases 63,550

THI-HAWAII, INC., a Hawaii Corporation, Plaintiff-Appellant, v. FIRST COMMERCE FINANCIAL CORPORATION, a Nevada Corporation and Ellaric Corporation, a Hawaii Corporation Defendants-Appellees.

No. 78-1302.

United States Court of Appeals Ninth Circuit.

Argued and Submitted June 12, 1980.

Decided Sept. 15, 1980.

Chad P. Love, Honolulu, Hawaii, argued, Daral G. Conklin, Honolulu, Hawaii, on brief, for plaintiff-appellant.

Wayne P. Nasser, Honolulu, Hawaii, for defendants-appellees.

On Appeal from the United States District Court for the District of Hawaii.

Before ANDERSON, FERGUSON and NELSON, Circuit Judges.

J. BLAINE ANDERSON, Circuit Judge:

The plaintiff, THI-Hawaii, Inc., (THI) appeals from the granting of summary judgment in defendants' favor on THI's complaint for treble damages, injunctive and declaratory relief under the Sherman Antitrust Act, 15 U.S.C. § 1 et seq., and the Clayton Act, 15 U.S.C. §§ 15 and 26. THI filed its complaint on September 29, 1977. Defendant Ellaric Corporation, later joined by defendant First Commerce Financial Corporation, filed its motion for summary judgment on October 19, 1977, along with its affidavits and exhibits. THI filed no affidavits or other factual responses in opposition to the motion. The district court granted Ellaric's motion following a hearing on November 21.

I. BACKGROUND

In 1967, AITS, Inc., while in the process of constructing the Hawaiian Regent Hotel in Waikiki, entered into an agreement with an individual named H. B. Rothbard, and First Commerce Financial Corporation (FCFC) whereby AITS agreed to lease to either Rothbard or FCFC 3,000 square feet of commercial space on the ground floor of the hotel. The agreement specified lease provisions, including a monthly rental of $1.00 per square foot, against 8% of the lessee's gross revenues, and granting Rothbard the exclusive right to sell certain items such as tobacco, sundries, and other tourist-oriented items and services within the hotel.

AITS, however, refused to execute the lease itself for reasons unimportant to the present appeal. Rothbard filed suit for specific performance in Hawaii state court, and obtained a decree of specific performance on March 5, 1973. AITS filed a notice of appeal to the Supreme Court of Hawaii. Coincidentally with its legal defeat at Rothbard's hands, AITS sold the Hawaiian Regent to THI-Hawaii, the plaintiff in the present action. THI and FCFC, holder of Rothbard's lease rights, immediately began conducting settlement negotiations.

On August 10, 1973, THI and FCFC entered into an Agreement of Lease which terminated the AITS-Rothbard litigation. Under the new lease, FCFC guaranteed an annual minimum rental of $90,000 per year or 8% of total gross sales if in excess of $1,125,000.00 per year. The lease also obligated FCFC to make improvements in the leased space at a cost of $10.00 per square foot. In FCFC's favor were the carrying over of the exclusive sales provision, and a provision giving FCFC the right to sell additional items on a nonexclusive basis, the right to open a "duty-free" shop, and the right to sell liquor. FCFC immediately subleased the space to Ellaric Corporation, which opened a gift shop known as "The Store."

THI's other commercial tenants at the Hawaiian Regent proved to be less than eager to observe the terms of the exclusive in Ellaric's lease. The record reflects several instances in which Ellaric discovered that items which it allegedly had the exclusive right to sell in the hotel were being sold by other establishments. Ellaric in each instance resorted to demand letters directed toward THI or to other forms of legal persuasion in an attempt to enforce the provisions of the exclusive. An additional sore spot arose sometime in 1976 when THI commenced construction of additional facilities adjacent to the Hawaiian Regent which it claimed were not covered by the exclusive. The relationship between THI as landlord on the one hand and FCFC and Ellaric as tenants on the other has thus been something of a running battle over the exclusive almost from the time of the inception of the lease.

THI, apparently exasperated over the insistence of FCFC and Ellaric on strict compliance with the terms of the exclusive, took the offensive by filing its antitrust complaint in the present action. The first count charged FCFC and Ellaric with violations of Section One of the Sherman Act, 15 U.S.C. § 1, alleging that the exclusive was an unreasonable restraint of trade, and also that the exclusive constituted a per se violation of the antitrust laws. The second count prayed for a declaratory judgment interpreting the lease and declaring it to be illegal. The total relief which THI sought included treble damages, injunctive relief against the enforcement of the exclusive, and the aforementioned declaratory relief.

Ellaric and FCFC countered with a motion for summary judgment, citing four alternative legal grounds, among them THI's involvement in the preparation and negotiation of the lease and its enjoyment of substantial revenues from the lease. In support of its motion, Ellaric filed an affidavit signed by Thomas Mui, president of Ellaric. The Mui affidavit stated, inter alia, that the lease was the result of a compromise reached between FCFC and THI over the Hawaiian state court litigation, and that most of the items contained in the exclusive were available from "most shops in Waikiki." Also attached were various papers, including copies of the original lease and the amendments made by THI and FCFC in 1973. A supplemental affidavit from Mui was later filed in which he asserted that less than two per cent of Ellaric's revenue was derived from sales in interstate commerce. An affidavit filed by FCFC in joinder to Ellaric's motion was accompanied by an affidavit signed by H. B. Rothbard in which he stated, inter alia, that at no time during the lease negotiations did any representative of THI suggest that the exclusive constituted an unreasonable restraint of trade or violated the antitrust laws. Mui also testified briefly at the hearing on the motion for summary judgment. THI submitted no affidavits in opposition.

The district court, in granting the defendants' motion, found that under a Rule of Reason analysis the exclusive did not render any substantial anti-competitive effect in the relevant market, which the court defined as including the entire Waikiki area. The court also found that THI had confirmed and ratified the exclusive, and was barred from any recovery because of its "truly complete involvement and participation in, and profit from, the exclusive sales provision."

THI's appeal followed.

II. DISCUSSION

A. Summary Judgment

THI, as a preliminary matter, questions whether summary judgment was appropriate in this case on two grounds. THI questions first the timing of judgment, and secondly, the use of summary judgment in an antitrust action.

1. Timing

THI objects to the entry of judgment so soon after the filing of its complaint. The district court granted the defendants' motion less than two months after THI first filed its action and prior to the completion of any discovery.

Fed.R.Civ.P. 56(e) directs that where a motion for summary judgment is filed, the opposing party "may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." Rule 56(e) concludes by noting that "(i)f he does not so respond, summary judgment, if appropriate, shall be entered against him." Under Rule 56(e), if the moving party presents evidence which, taken by itself, would establish the right to a directed verdict at trial then the motion for summary judgment must be granted in the absence of any presentation by the opposing party. See Neely v. St Paul Fire & Marine Insurance Co., 584 F.2d 341, 343 (9th Cir. 1978); Donnelly v. Guion, 467 F.2d 290 (2d Cir. 1972). Once the moving party has met the initial burden of going forward, the opposing party may not defeat summary judgment in the absence of any significant probative evidence tending to support his or her theory. First National Bank v. Cities Service Co., 391 U.S. 253, 290, 88 S.Ct. 1575, 1593, 20 L.Ed.2d 569 (1968); Commodity Futures Trading Commission v. Savage, 611 F.2d 270, 282 (9th Cir. 1979).

Where the opposing party has not had sufficient time to complete discovery or otherwise marshal facts to oppose the motion, application may be made under Rule 56(f) for a continuance of the proceedings pending completion of discovery. If the opposing party fails to take advantage of Rule 56(f), summary judgment may be entered, if otherwise appropriate. See British Airways Board v. Boeing Co., 585 F.2d 946, 954 (9th Cir. 1978), cert. denied, 440 U.S. 981, 99 S.Ct. 1790, 60 L.Ed.2d 241 (1979); Corbin v. Pan Am. World Airways, Inc., 432 F.Supp. 939, 945 (N.D. Calif. 1977).

THI's failure to move for a continuance under Rule 56(f) prevents it from complaining of the timing of summary judgment in this case. In the absence of an application for continuance, the district court had before it all of the evidence which it could reasonably conclude would be submitted. There was absolutely no reason to delay entry of judgment. The court did not err in granting the defendants' motion prior to any discovery. ¹

2. Summary judgment in antitrust actions

THI also urges us to reverse summary judgment on the basis of the oft-invoked language of Poller v. Columbia Broadcasting System, 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962) that ". . . summary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles, the proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot." Id. at 473, 82 S.Ct. at 491. While we agree that summary...