ITCO Corp. v. Michelin Tire Corp., Commercial Div.

Decision Date23 November 1983
Docket Number82-2178,Nos. 82-2177,s. 82-2177
Citation722 F.2d 42
Parties1983-2 Trade Cases 65,726 ITCO CORPORATION, Appellant, v. MICHELIN TIRE CORPORATION, COMMERCIAL DIVISION, Appellee. and State of North Carolina, Amicus Curiae. ITCO CORPORATION, Appellee, v. MICHELIN TIRE CORPORATION, COMMERCIAL DIVISION, Appellant.
CourtU.S. Court of Appeals — Fourth Circuit

Charles Gordon Brown, Chapel Hill, N.C. (Jordan, Brown, Price & Wall, John R. Jordan, Jr., Jordan, Brown, Price & Wall, Chapel Hill, N.C., Samuel W. Johnson, Meadows, Johnson & Spinks, Rocky Mount, N.C., John F. Dienelt, Brownstein, Zeidman & Schomer, Washington, D.C., on brief), for appellants.

J. Brantley Phillips, Jr., Natalma M. McKnew, Greenville, S.C. (Fletcher C. Mann, Leatherwood, Walker, Todd & Mann, Greenville, S.C., Jerry S. Alvis, Young, Moore, Henderson & Alvis, Raleigh, N.C., on brief), for appellee.

Rufus L. Edmisten, Atty. Gen. of North Carolina, H.A. Cole, Jr., Sp. Deputy Atty. Gen., John R. Corne, Associate Atty. Gen., Raleigh, N.C., on brief, for amicus curiae.

Before RUSSELL and MURNAGHAN, Circuit Judges and BULLOCK, * District Judge.

MURNAGHAN, Circuit Judge:

The case affords us a third opportunity to consider the antitrust implications of Michelin Tire Corporation's decision to terminate dealership arrangements with certain of its large dealers. The aggrieved dealer-plaintiff may have differed in each of the cases, but our views on the substantive law have held fast, since the first time, see Donald B. Rice Tire Co. v. Michelin Tire Corp., 638 F.2d 15 (4th Cir.1981), 1 and since the second time, see Bostick Oil Co. v. Michelin Tire Corp., 702 F.2d 1207 (4th Cir.1983), cert. denied, --- U.S. ----, 104 S.Ct. 242, 77 L.Ed.2d ---- (1983), 2 we considered such matters. Cases, however, frequently turn not on the substantive law that must guide decision but, instead, on their particular procedural countenances. Indeed, the novel and dispositive question facing us, in the end, is one sounding in civil procedure and concerning the scope of the doctrine of res judicata.

I

ITCO Corporation, the plaintiff and appellant, is an independent tire distributor whose headquarters are located in Wilson, North Carolina. In the spring of 1974, ITCO responded to advertisements placed by Michelin, the defendant and appellee, which sought dealers for Michelin's radial tires in the United States. At the time, Michelin, a New York corporation whose parent entity is of French origin, was embarking upon a full scale effort to develop markets, a campaign the details of which may be found in the district court opinion in Donald B. Rice Tire Co. v. Michelin Tire Corp., 483 F.Supp. 750, 752-53 (D.Md.1980) aff'd, 638 F.2d 15 (4th Cir.1981). After several meetings and communications, Michelin and ITCO entered into a standard "Dealer Sales Agreement" dated September 25, 1974. The agreement, which by its terms was to expire automatically at the end of a one-year period, was renewed on April 23, 1975, on January 27, 1976, and on January 27, 1977.

Pursuant to the agreement, ITCO obligated itself to "vigorously and aggressively promote the retail sale of Michelin Products and ... render prompt, workmanlike and courteous service with respect to Michelin Products including all services to which a purchaser of Michelin Products from any authorized Michelin source may be entitled." The agreement also required that ITCO "establish and maintain a place of business satisfactory to [Michelin] in appearance, size, layout and equipment and at all times be in a position to adequately and professionally service Michelin Products."

On December 22, 1977, ITCO was informed by Michelin that the dealership agreement would not be renewed again. The crucial factual question, as yet unresolved, asks why Michelin decided to terminate its dealership arrangement with ITCO. 3 It is a factual dispute the resolution of which, as we acknowledged in our Bostick decision and in our Rice decision, will dictate whether the termination decision constitutes anticompetitive behavior rendered per se unlawful under Sec. 1 of the Sherman Act, see Bostick, supra, at 1215 (and hence a violation of North Carolina's Unfair Trade Practices Act, N.C.Gen.Stat. Sec. 75-1.1), or, instead, a legitimate business decision with socially beneficial ramifications, see Rice, supra, at 17.

Michelin contends, as it did in the Bostick case with respect to its termination of Bostick Oil Company as a dealer, that its decision to sever its relationship with ITCO was a unilateral choice stemming solely from a disenchantment with ITCO's performance as a dealer. Specifically, Michelin maintains that ITCO failed to provide any retail tire services in Charlotte, North Carolina, thus falling short of its contractual obligation to sell and service Michelin Products "in a first class manner."

And indeed, ITCO does not contest the fact that the absence of retail services in Charlotte had become a matter of dispute, discussion, and negotiation between the parties. But ITCO steadfastly maintains, as did Bostick Oil Company, that the issue of retail service was an entirely minor concern, and not the real reason underlying Michelin's decision to sever its relationship with the dealer. Rather, ITCO intends to prove, as Bostick intended to prove, that the termination decision was the action of an anticompetitive conspiracy among ITCO's rival dealers and Michelin itself--a combination calculated to fix prices in the retail tire market. According to its own version of the facts, ITCO, as a large and cost-efficient seller of tires both at the retail and wholesale level, could purchase tires in exceedingly large quantities from Michelin. Because of its high-volume purchases, ITCO was able to obtain especially lucrative benefits under Michelin's pricing system, which grants price discounts that, generally speaking, rise in tandem with the number of tires purchased by a dealer. 4 According to ITCO's calculations, a dealer able to obtain the full panoply of discounts offered by Michelin could receive an aggregate discount of 44.28 percent off of Michelin's suggested retail prices. While the record is not fully developed at this pretrial stage of the case, it is alleged that ITCO obtained discounts nearing or reaching that maximum figure.

ITCO contends that, by virtue of the discounts it received, it found itself in a competitively advantageous situation vis-a-vis most other authorized Michelin dealers. Not only could ITCO effectively undercut the prices offered by the smaller authorized dealers in the retail consumer market, but ITCO also could compete effectively with Michelin itself in the wholesale market, on sales to retail tire merchants who had not entered a dealership agreement with Michelin. Both phenomena, it is alleged, drew the ire of ITCO's competitors, authorized dealers who thus faced increased competition on the one hand from ITCO, and on the other hand, from unauthorized retail dealers who purchased tires from ITCO at wholesale prices lower than those offered to the complaining, authorized, dealers by Michelin.

Crucially, for antitrust purposes, it is alleged that ITCO's disenchanted competitors aired their gripes to Michelin in what amounted to a call for protective action from the manufacturer. ITCO directs our attention to a notation made by Michelin's district manager which purportedly logs one such complaint:

Dealer very upset over the large amount of wholesaling taking place in his area. Retail selling prices he claims are floating at 20 to 30% below suggested exchange. Wholesale selling prices are normally at 30 + 5 off.

Michelin responded to the lament of the smaller dealer, ITCO asserts, by deciding to terminate its dealer arrangements with four similarly situated large dealers--ITCO itself, Bostick, Rice, and Englewood Tire Distributors. In support of that contention, ITCO points to a memorandum written by Michelin's district manager, recommending that the manufacturer terminate its dealings with the "large wholesalers" and, in particular, with Bostick:

I feel that in the long run, we would be better off without the large wholesaler such as Bostick Oil Co., Inc. ... [T]he overall morale of the rest of our dealers in this area would improve considerably.

The memorandum goes on to suggest, albeit less than directly, that the disenchantment of rival dealers with the price-cutting actions of the "larger wholesalers" figured in the decision:

Another greater possibility is that another large wholesaler would simply see a great opportunity and pick up where Bostick left off [if Bostick alone were terminated]. Due to this, it would appear to me that if a move is made to get rid of the large wholesalers whom we are in competition with, this move would have to be made throughout other areas as well. In other words, I find it difficult to see how we could ever be selective as just what wholesalers we are going to keep.

In concluding, the memorandum listed the largest wholesalers in the Charlotte, North Carolina district. Bostick was listed. So was ITCO.

Perceiving a colorable claim under the antitrust laws, ITCO brought suit in the United States District Court for the Eastern District of North Carolina, alleging that Michelin's decision to terminate the dealership arrangement presented a conspiracy in restraint of trade prohibited by Sec. 1 of the Sherman Act, 15 U.S.C. Sec. 1. Availing itself of the district court's pendent jurisdiction, see United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966), and, in the alternative, the court's diversity jurisdiction, 28 U.S.C. Sec. 1332, 5 ITCO also alleged that Michelin's decision constituted a violation of North Carolina's Unfair Trade Practices Act, N.C.Gen.Stat. Sec. 75-1.1. ITCO moved for and obtained a temporary restraining order prohibiting Michelin from implementing its decision to terminate ITCO, thus leaving ...

To continue reading

Request your trial
199 cases
  • Wright v. Carroll Cnty. Bd. of Educ.
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • 26 Agosto 2013
    ...a federal district court applies the choice of law rules of the forum state.") (Citing ITCO Corp. v. Michelin Tire Corp., Commercial Div., 722 F.2d 42, 49 n.11 (4th Cir. 1983)). With respect to tort claims, Maryland applies the principle of lex loci delicti, i.e., the law of the "place of t......
  • Marcas, L.L.C. v. Bd. of Cnty. Comm'rs of St. Mary's Cnty., Civil Action No. WGC-07-196
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • 28 Septiembre 2011
    ...Paving & Excavating, Inc. v. Penn. Mfrs.' Assn Ins. Co., 176 F.3d 794, 797 (4th Cir. 1999) (citing ITCO Corp. v. Michelin Tire Corp., 722 F.2d 42, 45 n.3 (4th Cir. 1983) ("The court is not permitted to resolve genuine issues of material fact on a motion for summary judgment — even where . .......
  • Marcas, L.L.C. v. Bd. of Cnty. Commissioners of St. Mary's Cnty., Civil Action No. WGC–07–196.
    • United States
    • United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Massachusetts
    • 28 Septiembre 2011
    ...Paving & Excavating, Inc. v. Penn. Mfrs.' Ass'n Ins. Co., 176 F.3d 794, 797 (4th Cir.1999) (citing ITCO Corp. v. Michelin Tire Corp., 722 F.2d 42, 45 n. 3 (4th Cir.1983) (“The court is not permitted to resolve genuine issues of material fact on a motion for summary judgment—even where ... b......
  • In re Terry
    • United States
    • United States District Courts. 4th Circuit. Middle District of North Carolina
    • 14 Marzo 2017
    ...claims, federal courts apply the choice-of-law rules of the state in which they sit. ITCO Corp. v. Michelin Tire Corp., Commercial Div., 722 F.2d 42, 49 n.11 (4th Cir. 1983), on reh'g, 742 F.2d 170 (4th Cir. 1984); Bethel v. Federal Express Corp., No. 1:09cv613, 2010 WL 3242651, at *5 (M.D.......
  • Request a trial to view additional results
2 books & journal articles
  • North Carolina. Practice Text
    • United States
    • ABA Antitrust Library State Antitrust Practice and Statutes (FIFTH). Volume II
    • 9 Diciembre 2014
    ...is likely to condemn conduct that violates any other provision of North Carolina antitrust law. Cf. ITCO Corp. v. Michelin Tire Corp., 722 F.2d 42, 48 (4th Cir. 1983) (holding that “proof of conduct violative of the Sherman Act is proof sufficient to establish a violation of the North Carol......
  • South Carolina. Practice Text
    • United States
    • ABA Antitrust Library State Antitrust Practice and Statutes (FIFTH). Volume III
    • 9 Diciembre 2014
    ...accomplished, would violate those acts, 25 acts that may not 16. Id. at 354. 17. Id. at 354-55. 18. ITCO Corp. v. Michelin Tire Corp., 722 F.2d 42, 48 (4th Cir. 1983). 19. 758 F. Supp. 1098 (D.S.C. 1990). 20. Id. at 1102. Although Cheshire distinguished Three J. Farms and In re Wiring Devic......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT