759 F.2d 1241 (5th Cir. 1985), 83-1632, C.E. Services, Inc. v. Control Data Corp.

Docket Nº:83-1632.
Citation:759 F.2d 1241
Party Name:C.E. SERVICES, INC., Plaintiff-Appellant, v. CONTROL DATA CORPORATION, Defendant-Appellee.
Case Date:May 13, 1985
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 1241

759 F.2d 1241 (5th Cir. 1985)

C.E. SERVICES, INC., Plaintiff-Appellant,

v.

CONTROL DATA CORPORATION, Defendant-Appellee.

No. 83-1632.

United States Court of Appeals, Fifth Circuit

May 13, 1985

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Shapiro, Edens & Cook, Paul J. VanOsselaer, Joseph Latting, Gregory C. Douglass, on the brief, Clark, Thomas, Winters & Newton, Austin, Tex., for plaintiff-appellant.

Kelley V. Rea, Minneapolis, Minn., Strasburger & Price, Ernest R. Higginbotham, Kevin B. Wiggins, Dallas, Tex., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before CLARK, Chief Judge, GOLDBERG and RUBIN, Circuit Judges.

GOLDBERG, Circuit Judge:

IBM makes machines, and machines break down. Seizing on this windfall opportunity, others have joined IBM in the mission to keep our nation's computers running. These somewhat parasitic entities are called "third-party maintenance firms."

Defendant-appellee Control Data Corporation is in the business of providing maintenance services for IBM 360 and 370 systems in the Dallas-Tarrant County area of Texas. In the summer of 1978, three employees of Control Data left the firm to form plaintiff-appellant C.E. Services, Inc. ("CES"), which in July of that year joined the IBM computer maintenance business, providing the same repair services as Control Data, other third-party maintenance firms, and IBM itself.

CES entered the world of third-party maintenance with a bang, soliciting customers from among those who were already aware of the capabilities of the former Control Data employees--that is, they seduced Control Data's clients. Ultimately, three of Control Data's clients cancelled their month-to-month contracts with the firm after having tendered their contractually required thirty-day notices of cancellation. By August of 1978, two additional Control Data customers had become serious prospects for CES.

Control Data responded in kind. As the result of an organizational meeting that August, the company contacted the CES converts and prospective converts in an effort to persuade them to return to or remain with Control Data. It offered to each a ten-percent price discount in exchange for a one-year obligation instead of the usual month-to-month agreements. The new discount supplemented a traditional five-percent discount that had been available

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to customers paying for an entire year's maintenance contract in advance.

The tactic apparently was effective, as CES went out of business for approximately one year. (Interestingly, the deceased revived: in 1979, CES obtained two maintenance customers from Control Data, at least one of which switched because CES offered to perform at a price lower than Control Data's.) Desolate and with no one else to turn to, CES filed suit in federal district court, alleging that Control Data's conduct violated section 2 of the Sherman Act, 15 U.S.C. Sec. 2 (1982), as well as state common law norms prohibiting interference with existing contractual and prospective business relationships. The district court eventually dismissed each claim on summary judgment and, severing the remaining counterclaims and third-party claims, entered a final judgment as to plaintiff's claims pursuant to Fed.R.Civ.P. 54(b). Because we believe that summary judgment was improperly granted as to the federal antitrust claims as well as to one of plaintiff's state law claims, we reverse and remand for a trial on these issues.

I. MONOPOLIZATION AND ATTEMPTED MONOPOLIZATION

Section 2 of the Sherman Act brands as outlaw "[e]very person who shall monopolize, or attempt to monopolize ... any part of the trade or commerce among the several States...." 15 U.S.C. Sec. 2. Monopoly power, in turn, is "the power to control price or exclude competition." United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391, 76 S.Ct. 994, 1004-05, 100 L.Ed. 1264 (1956). The offense of completed monopolization requires proof of two elements: "(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 1703-04, 16 L.Ed.2d 778 (1966). Similarly, the section 2 plaintiff must prove two elements for the attempt offense: (1) specific intent to accomplish the illegal result, and (2) a dangerous probability that the attempt will be successful. United States v. American Airlines, Inc., 743 F.2d 1114, 1118 (5th Cir.1984); Domed Stadium Hotel, Inc. v. Holiday Inns, Inc., 732 F.2d 480, 490 (5th Cir.1984); Spectrofuge Corp. v. Beckman Industries, Inc., 575 F.2d 256, 276 (5th Cir.1978), cert. denied, 440 U.S. 939, 99 S.Ct. 1289, 59 L.Ed.2d 499 (1979).

A prerequisite to success under section 2 on either a completed or attempted monopolization claim is proof of the relevant market. E.g., Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 177, 86 S.Ct. 347, 350, 15 L.Ed.2d 247 (1965); Spectrofuge Corp. v. Beckman Instruments, Inc., 575 F.2d at 276. "The relevant market establishes the backdrop against which to measure economic power." In re Municipal Bond Reporting Antitrust Litigation, 672 F.2d 436, 441 (5th Cir.1982). The relevant market inquiry, of course, has both geographical and product elements, Domed Stadium, 732 F.2d at 487, as to which the plaintiff bears the burden of proof, du Pont, 351 U.S. at 381, 76 S.Ct. at 999.

Because this case comes to us on summary judgment, our analysis of the relevant service 1 market is necessarily circumscribed. The moving party must have shown, in light of the entire record, that there was no genuine issue as to any material fact and that the district court was therefore justified in entering judgment as a matter of law. Fed.R.Civ.P. 56(c); e.g., Poller v. Columbia Broadcasting System, 368 U.S. 464, 467, 82 S.Ct. 486, 488, 7 L.Ed.2d 458 (1962). This inquiry involves competing considerations. On the one hand, we must draw all reasonable inferences in favor of the party opposing the

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motion, e.g., United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962) (per curiam), but on the other hand, the nonmoving litigant must point to "significant probative evidence" demonstrating the existence of a triable issue of fact, e.g., Municipal Bond, 672 F.2d at 440. On the one hand, summary judgment is especially disfavored in "complex, fact-sensitive antitrust cases," see Fortner Enterprises, Inc. v. United States Steel Corp., 394 U.S. 495, 505, 89 S.Ct. 1252, 1259-60, 22 L.Ed.2d 495 (1969); Poller, 368 U.S. at 473, 82 S.Ct. at 491, but on the other hand, " 'simply because a case is based upon the antitrust laws does not suspend the application of Rule 56,' " Domed Stadium, 732 F.2d at 486 (quoting Aladdin Oil v. Texaco, Inc., 603 F.2d 1107, 1111 (5th Cir.1979)). "In short, the requirements of Rule 56 are no less applicable in antitrust actions." Municipal Bond, 672 F.2d at 440; see First National Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 287 n. 18, 88 S.Ct. 1575 (1968); Bayou Bottling, Inc. v. Dr. Pepper Co., 725 F.2d 300, 303 (5th Cir.1984), cert. denied, --- U.S. ----, 105 S.Ct. 123, 83 L.Ed.2d 65. See generally 2 P. Areeda & D. Turner, Antitrust Law p 316, at 57-59 (1978).

The parties do not contest that the relevant geographic market is the Dallas-Tarrant County area. CES maintains, however, that the relevant service market comprises only third-party maintenance firms, to the exclusion of IBM. On appellant's view, if third-party firms are found to constitute a distinct submarket for the maintenance of IBM 360 and 370 computers, then Control Data owns an 83% share of the relevant market. Appellee counters that IBM, which itself offers to maintain the 360 and 370 lines, furnishes a service indistinguishable from that of the third-party firms and should therefore be included in a unitary market for the maintenance of these machines. The...

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