Burlington Coat Factory Warehouse Corp. v. Esprit De Corp.

• Decision Date: 06 August 1985
• Docket Number: D,No. 957,957
• Citation: 769 F.2d 919
• Parties: 1985-2 Trade Cases 66,732, 3 Fed.R.Serv.3d 585 BURLINGTON COAT FACTORY WAREHOUSE CORPORATION, Plaintiff-Appellant, v. ESPRIT DE CORP. and Federated Department Stores, Inc., Defendants-Appellees. ocket 85-7012.
• Court: U.S. Court of Appeals — Second Circuit

Page 919

769 F.2d 919

1985-2 Trade Cases 66,732, 3 Fed.R.Serv.3d 585

BURLINGTON COAT FACTORY WAREHOUSE CORPORATION, Plaintiff-Appellant, v. ESPRIT DE CORP. and Federated Department Stores, Inc.,

Defendants-Appellees.

No. 957, Docket 85-7012.

United States Court of Appeals, Second Circuit.

Argued March 27, 1985.

Decided Aug. 6, 1985.

Herbert S. Kassner, New York City (Stacy J. Haigney, Denise M. Cossu, Kassner, Haigney & Thompson, New York City, of counsel), for plaintiff-appellant.

Murray H. Bring, Washington, D.C. (G. Duane Vieth, John Kronstadt, Mark R. Merley, Arnold & Porter, Washington, D.C., Lois D. Thompson, Proskauer Rose Goetz & Mendelsohn, New York City, Thomas G. Cody, Sr. Vice President, Boris Auerbach, Vice President, Federated Dept. Stores, Inc., of counsel), for defendant-appellee Federated Dept. Stores, Inc.

Fredric W. Yerman, New York City (Richard A. De Sevo, Kaye, Scholer, Fierman, Hays & Handler, New York City, of counsel), for defendant-appellee Esprit De Corp.

Before FEINBERG, Chief Judge, and OAKES and WINTER, Circuit Judges.

WINTER, Circuit Judge:

Burlington Coat Factory Warehouse Corporation ("Burlington") appeals from Judge Duffy's grant of summary judgment. 597 F.Supp. 1199 (S.D.N.Y.1984). Burlington claims that Federated Department Stores, Inc. ("Federated") conspired with Esprit De Corp. ("Esprit") to fix resale prices in violation of Sec. 1 of the Sherman Act, 15 U.S.C. Sec. 1 (1982). Burlington also claims that pursuant to this conspiracy Esprit discontinued sales to Burlington in violation of their contract. We affirm the grant of summary judgment on the antitrust claim but reverse the grant of summary judgment on the contract claim.

BACKGROUND

Burlington is a no-frills, discount clothing retailer with over 30 outlets in numerous states east of the Mississippi. Federated is the owner of a number of full-price department store chains comprising one of the largest retailing organizations in the country. Esprit is a manufacturer of a high-price line of clothing that is sold under the Esprit name.

Until July, 1983, Esprit sold its clothing both to Burlington and Federated, with Federated being by far the larger purchaser. On July 29, Esprit refused to fill Burlington's most recent orders and informed Burlington that it would no longer sell to it.

In June, 1983, one month prior to Esprit's refusal to sell to Burlington, Alan Questrom, the chairman of one of Federated's chains, made a speech on off-price retailing at a meeting attended by representatives of some 600 major retailers and garment makers. His message was that Federated believed that discounters were Burlington claims that this speech was the cause of Esprit's refusal one month later to do further business with Burlington. Burlington also notes that Esprit cancelled its relationship with Burlington without following internal procedures requiring Esprit salespersons to take photographs of and file reports on retailers so that Esprit headquarters could determine that the retailers met Esprit marketing standards. Burlington also claims that Federated officials pressured other suppliers not to sell to Burlington.

                taking unfair advantage of the marketing efforts of full-price retailers.  To end this free-riding, he stated, Federated was going to stop dealing with manufacturers who sold current-season fashions to discounters.  He added that "[i]t is inconceivable to us at Federated how a manufacturer could possibly justify bastardizing a great brand name or designer in whom they have invested millions to build status, credibility and consumer confidence [by selling to off-pricers]....  Doing business with a compromising [manufacturer] may just be too great a risk for the department store to take."    He further stated that Federated would review the distribution policies of its suppliers to ensure that those policies were "compatible with [Federated's] marketing objectives."
                

Esprit claims that it was unaware of Questrom's statements and received no complaints from Federated about Burlington. Federated joins in that claim. Esprit also asserts that sales of its clothing were growing so rapidly that it was unable to fill all pending orders. As a result, it had to drop some retailers and chose to drop those that did not meet its marketing standards. Esprit markets its clothing as a coordinated group and prefers that its entire line be physically separated from other lines, a layout requirement not met by Burlington. Esprit asserts that resale prices were not a factor in its decision and notes that in the course of reducing the number of its retailers it retained some discount retailers whose layouts met Esprit's standards but dropped some full price retailers whose layouts did not. The precise circumstances surrounding termination of Burlington were that Burlington's July 1983 orders were five times larger than any previous order. This unexpected increase brought that company's relationship with Esprit to the immediate attention of Esprit senior management in part because Esprit suspected that Burlington was shipping Esprit clothing to areas not approved by Esprit.

Judge Duffy granted the defendants' motions for summary judgment, stating that there was no direct or circumstantial evidence of an illegal agreement between Esprit and Federated, evidence necessary under Monsanto v. Spray-Rite Corp., 465 U.S. 752, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984). Burlington argued that it needed time for additional discovery, but the district court denied the request, stating that Burlington had been inexcusably dilatory in pursuing discovery and had failed to explain how further discovery was necessary.

The district court also disposed sub silentio of the contract claim by dismissing the complaint in its entirety. It gave no explanation of why the contract claim was legally or factually insufficient.

DISCUSSION

Burlington raises two issues on appeal with regard to the antitrust claim. First, it claims that its evidentiary submission creates a material issue of fact as to a conspiracy between Esprit and Federated. Second, it argues that it should have been granted time for additional discovery pursuant to Fed.R.Civ.P. 56(f). Regarding the contract claim, Burlington argues that the district court should not have dismissed the complaint in its entirety based solely on its disposition of the antitrust claims.

We address plaintiff's claims in light of the familiar rule that summary judgment under Fed.R.Civ.P. 56 may be granted only when, viewing the evidence in the light most favorable to the opponent of the motion, there is no genuine issue of material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). The moving party thus has the burden to demonstrate that there is no such disputed issue and that it is entitled to judgment as a matter of law. Reborn Enterprises, Inc. v. Fine Child, Inc., 590 F.Supp. 1423, 1435 (S.D.N.Y.1984), aff'd 754 F.2d 1072 (2d Cir.1985) (per curiam). However, disputes over irrelevant facts must not be allowed to obscure the lack of a material dispute, Reborn, 590 F.Supp. at 1436, SEC v. Research Automation Corp., 585 F.2d 31, 35 (2d Cir.1978), and the party opposing the motion may not stand mute in reliance solely upon its allegations when facing a substantial evidentiary submission refuting its claim. An antitrust plaintiff may not, therefore, in opposing a motion for summary judgment, rest on conclusory assertions of conspiracy when the defendants have proffered substantial evidence supporting a plausible and legitimate explanation of their conduct. First National Bank v. Cities Service Co., 391 U.S. 253, 289, 88 S.Ct. 1575, 1592, 20 L.Ed.2d 569 (1968); Reborn, 590 F.Supp. at 1436.

1. The Antitrust Claim

The Supreme Court continues to adhere to the view that Sec. 1 of the Sherman Act ¹ proscribes vertical price fixing between a manufacturer and its distributers. Monsanto, 104 S.Ct. at 1469, n. 7. Burlington claims that Federated and Esprit conspired to engage in price fixing, conduct that violates Sec. 1 and was the cause of Esprit's refusal to deal with Burlington, a professed discount seller.

In Monsanto, the Supreme Court described the proof necessary to show illegal price fixing between a manufacturer and a distributor. The Court noted: "A manufacturer of course generally has a right to deal, or refuse to deal, with whomever it likes, as long as it does so independently." Monsanto, 104 S.Ct. at 1469. Accordingly, the plaintiff must show concerted action by producing "evidence that tends to exclude the possibility that the manufacturer and nonterminated distributors were acting independently." Id. at 1471.

Burlington's claim of concerted action in the present case rests on the following:

1) the one month interval between Questrom's speech and Esprit's cancellation of Burlington;

2) Esprit's failure to follow its internal requirements that its salespersons take photographs and file a report before cancelling a retailer;

3) Esprit's failure to disclose to Burlington until after the cancellation Esprit's preference that retailers physically segregate Esprit clothing;

4) testimony by a Burlington official that he had heard that Federated pressured suppliers other than Esprit not to sell to Burlington.

We conclude that Burlington has failed to meet the Monsanto test. Direct complaints from Federated to Esprit would be, by themselves, insufficient to show a conspiracy between Federated and Esprit, even if Esprit cancelled Burlington immediately thereafter. "Permitting an agreement to be inferred merely from the existence of complaints, or even from the fact that termination came about 'in response to' complaints, could deter or penalize perfectly legitimate conduct.... Such complaints, particularly where the manufacturer has imposed a costly set of nonprice restrictions, 'arise in the normal course of business and do not indicate illegal concerted...