Phil Tolkan Datsun, Inc. v. Greater Milwaukee Datsun Dealers' Advertising Ass'n, Inc.

• Decision Date: 02 March 1982
• Docket Number: No. 81-1403,81-1403
• Citation: 672 F.2d 1280
• Parties: 1982-1 Trade Cases 64,579 PHIL TOLKAN DATSUN, INC., Plaintiff-Appellant, v. The GREATER MILWAUKEE DATSUN DEALERS' ADVERTISING ASSOCIATION, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1280

672 F.2d 1280

1982-1 Trade Cases 64,579

PHIL TOLKAN DATSUN, INC., Plaintiff-Appellant, v. The GREATER MILWAUKEE DATSUN DEALERS' ADVERTISING ASSOCIATION, INC., et al., Defendants-Appellees.

No. 81-1403.

United States Court of Appeals Seventh Circuit.

Argued Nov. 4, 1981.

Decided March 2, 1982.

Robert B. Corris, Charne, Glassner, Tehan, Clancy & Taitelman, S. C., Milwaukee, Wis., for plaintiff-appellant.

Scott W. Hansen, Reinhart, Boerner, Van Deuren, Norris & Rieselbach, S. C., Milwaukee, Wis., for defendants-appellees.

Before CUMMINGS, Chief Judge, CUDAHY, Circuit Judge, and CAMPBELL, Senior District Judge. ^*

CUDAHY, Circuit Judge.

In this private antitrust action, plaintiff-appellant Phil Tolkan Datsun ("Tolkan" or "Tolkan Datsun") appeals from a grant of summary judgment in favor of defendants Greater Milwaukee Datsun Dealers' Association (the "Association") and its individual members and directors. Because we agree that the undisputed facts demonstrate the absence of federal antitrust liability, we affirm the judgment of the district court.

I.

The Nissan Motor Corporation ("Nissan") distributes its Japanese-made automobiles and trucks in the United States under the name "Datsun". In 1976, Nissan began encouraging Datsun dealers in this country to form advertising associations. Nissan offered to add $40 to the invoice of each car or truck sold to each dealer in an area, and to distribute this money to the local association for joint advertising purposes. In addition to the benefits of joint advertising, association members were to be allowed extra allotments of cars for special Datsun promotions.

Defendants AFL Motors, Inc., Zimdars Motors, Inc. and Waukesha Datsun, Inc. are all Datsun dealers located in and around Milwaukee, Wisconsin. On August 2, 1978, AFL Motors, Zimdars Motors and Waukesha Datsun formed the Greater Milwaukee Datsun Dealers' Association, also a defendant here. On that day the Association adopted corporate by-laws which included a requirement that existing members unanimously approve the admission of any new member.

On January 17, 1979, Nissan sent a letter to all car dealers in the four-county Milwaukee area, "actively soliciting candidates with automobile background and necessary capital" to establish an additional Datsun dealership in the North Milwaukee area. AFL and Zimdars objected to this solicitation because they believed Nissan was not supplying them with enough new cars to meet existing customer demand. AFL Motors was also upset about Nissan's search for an additional dealer because in mid-1978 AFL had moved several miles north from its central city location to provide Nissan with the "North Milwaukee" dealership Nissan was now soliciting.

On March 21, 1979, Nissan sent its Milwaukee dealers a letter stating that a new Datsun dealership would be located at 7676 North 76th Street, Milwaukee, the address of Phil Tolkan Pontiac, Inc. On March 28, 1979, AFL Motors and Zimdars Motors wrote to Nissan, formally objecting to the new dealership. On April 17, 1979, AFL and Zimdars filed an action in state court seeking to enjoin Nissan from appointing a new Milwaukee-area dealer. On May 1, 1979, Tolkan Datsun was formally appointed a Datsun dealer, and on May 7, Tolkan's state dealership license issued. Upon the application of AFL and Zimdars, the state court issued an ex parte temporary restraining order on May 7, 1979, prohibiting Nissan from establishing a Datsun dealership at 7676 North 76th Street. After a hearing on May 14, 1979, the temporary restraining order was dissolved.

Sometime in May 1979, Nissan presented to Tolkan Datsun, and the dealership signed, an application for membership in the defendant Association. Apparently, this application was never forwarded to the Association itself. Nevertheless, the subject of Tolkan's possible membership was discussed at an Association meeting on May 25, 1979. According to minutes taken at that meeting, Phil Tolkan was to be called and asked to apply for membership so that the Association could consider his application. ¹

In the meantime, the Association had been planning a special Datsun promotion. On March 21, 1979, the Association discussed the submission of a proposal involving the sale of Datsun 210s, the lowest-priced Nissan car. On March 22, 1979, the vice president of AFL Motors, the president of Zimdars Motors, and the secretary of Waukesha Datsun sent identically-worded letters to Nissan's regional sales manager, Robert Bower, each requesting 100 Datsun Model 210 hatchbacks for the special promotion. Kenneth Ausman, the president of the Association, also sent a letter in his official capacity asking for the 300 cars. On April 19, 1979, Bower wrote to Ausman as Association president to inform him that the request "for 300 additional 210 models for your scheduled advertising promotion has been approved." Bower indicated that production of the cars was scheduled for mid-May, with delivery to take place in mid-to-late June. On May 22, 1979, Bower wrote to Ausman, again as Association president, to advise of receipt of a "preliminary notice of shipment of the vehicles for your Association's promotion."

The Association's first advertising appeared in the Sunday, June 10, 1979, Milwaukee Journal. Because Tolkan Datsun was not among the dealers listed, Thomas Weil, president of Tolkan, called Bower to complain. On June 11, 1979, Bower wrote to Ausman as Association president informing Ausman that Tolkan had signed an application supplied by Nissan for membership in the Association. On June 14, 1979, Ausman answered by letter, stating that (A)lthough Phil Tolkan requested information concerning membership in our Advertising Association, we have not yet received a formal application as called for by our by-laws. As a courtesy to Phil Tolkan, we have, by letter of even date, forwarded to them our application should they be interested.

Shortly thereafter, Tolkan substantially completed and returned the Association's application, along with a letter objecting to some of the questions on the form.

At an Association meeting on July 9, 1979, AFL, Zimdars, and Waukesha Datsun discussed Tolkan Datsun's application for membership in the Association. The members decided that Tolkan's admission would not be considered until September 1, 1979, or until the end of the 210 promotion, whichever occurred first. In a letter dated July 20, 1979, Ausman as Association president informed Tolkan president Weil of the Association's decision. Tolkan Datsun did not object to this decision.

During this time, the state court action by AFL and Zimdars against Nissan remained pending. ² AFL Motors was opposed to admitting Tolkan Datsun to the Association until the action was resolved because it felt that doing so might contradict its legal position that Nissan should not have appointed a new Milwaukee area dealer. AFL re-emphasized this concern on September 10, 1979, when the Association again met to consider Tolkan Datsun's admission. The other two Association members took the position that Tolkan Datsun should be admitted or the Association dissolved. Unable to reach agreement, the members decided to deactivate the Association. On September 11, 1979, Ausman, as Association president, informed Tolkan that

(B)y vote of the membership, your Application for Membership is being held in ab(e)yance, pending the outcome of litigation between several of the Members and Nissan.

On September 28, 1979, Tolkan Datsun filed suit in federal court against the Association, its members and officers, claiming violations of both state and federal antitrust laws. Tolkan alleged that the Association's refusal to admit Tolkan as a member constituted a group boycott and was thus per se illegal under § 1 of the Sherman Antitrust Act, 15 U.S.C. § 1 (1976). Tolkan also contended that the same legal principles entitled it to damages at least equal to the profits on 60 Datsun Model 210s-such profits representing the difference between the money Tolkan would have made from an 80-vehicle pro rata share of 320 promotional hatchbacks (the 300 cars ordered by the Association plus 20 additional vehicles that would have been made available by Nissan's Chicago office) and the profit Tolkan actually garnered from the 20 extra cars provided to him during the promotion period.

On April 22, 1980, Tolkan filed a motion for partial summary judgment on its federal antitrust claims. The Association filed a cross motion for summary judgment, arguing inter alia, that its temporary refusal to admit Tolkan as a member did not constitute a per se antitrust violation, that Tolkan Datsun was not entitled to participate in the special 210 promotion and that, absent such an entitlement, Tolkan had suffered no competitive injury as a result of the Association's actions or the operation of its by-laws. ³ On February 12, 1981, the district court granted the Association's motion for summary judgment and dismissed Tolkan's complaint. The district court held that the Association's conduct was not per se illegal, and that under the rule of reason, Tolkan had failed to allege sufficient anticompetitive injury to establish a violation of § 1 of the Sherman Act. On appeal, Tolkan challenges both of these conclusions.

II.

As this court recently re-emphasized, the rule of reason is the standard traditionally applied to most anticompetitive practices challenged under § 1 of the Sherman Act. United States Trotting Association v. Chicago Downs Association, 665 F.2d 781, 787 (7th Cir. 1981) (en banc). There are, however, a limited number of practices "which, because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal" without the often elaborate inquiry into anticompetitive effect which is characteristic of rule of reason analysis. Northern Pac. Ry. Co. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 518, 2...