Motive Parts Warehouse v. Facet Enterprises, 82-2131

• Decision Date: 27 September 1985
• Docket Number: No. 82-2131,82-2131
• Citation: 774 F.2d 380
• Parties: 1985-2 Trade Cases 66,787 MOTIVE PARTS WAREHOUSE, Plaintiff-Appellant, v. FACET ENTERPRISES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 380

774 F.2d 380

1985-2 Trade Cases 66,787

MOTIVE PARTS WAREHOUSE, Plaintiff-Appellant, v. FACET ENTERPRISES, Defendant-Appellee.

No. 82-2131.

United States Court of Appeals, Tenth Circuit.

Sept. 27, 1985.

Robert W. Steele (W. Donald Dresser and Cheryl Browning, with him on briefs), Howrey & Simon, Washington, D.C., for plaintiff-appellant.

Burck Bailey, Fellers, Snider, Blankenship, Bailey & Tippens, Oklahoma City, Okl. (Fraser McAlpine, Andrews & Kurth, Houston, Tex., with him on brief), for defendant-appellee.

Before BARRETT and McKAY, Circuit Judges, and BURCIAGA, District Judge. ^*

BURCIAGA, District Judge.

Facet Enterprises ["Facet"], Appellee--a supplier of, inter alia, P & D brand auto parts and equipment--filed suit against Motive Parts Warehouse ["MPW"], Appellant--a warehouse distributor doing business in the automotive replacement parts aftermarket--to collect on an open account for goods sold. MPW counterclaimed, alleging violations by Facet of Section 1 of the Sherman Act, 15 U.S.C. Sec. 1 (1976), and Sections 2(a), (d) and (e) of the Clayton Act, 38 Stat. 730, as amended by the Robinson-Patman Act, 15 U.S.C. Secs. 13(a), (d) and (e) (1976), as well as breach of contract, misrepresentation, and intentional infliction of economic harm.

The district court granted summary judgment to Facet on its complaint, leaving for trial the counterclaims asserted by MPW, including the question of setoff damages allegedly arising from Facet's failure to make appropriate credits to MPW's account. The case was tried to a jury, with MPW in the position of plaintiff and Facet in the position of defendant.

Following ten days of evidence, the trial judge granted Facet's motion for directed verdict on the Sherman Act and Robinson-Patman Act claims arising from Facet's Wagon Master franchise program, and on MPW's pendent claims for misrepresentation and intentional infliction of economic harm. MPW's remaining Robinson-Patman Act claims concerning Facet's sales to Keystone Automotive Warehouse ["Keystone"], and its breach of contract claim against Facet were submitted to the jury. The jury returned a verdict in Facet's favor on each of those claims.

MPW's subsequent motions for judgment notwithstanding the verdict or for new trial were denied, and judgment was entered against MPW on all claims. In addition, the court assessed postjudgment interest at 15% per annum and awarded attorneys' fees to Facet in the amount of $80,246.50.

On appeal, MPW asserts that the trial court erred in granting Facet's motion for directed verdict with respect to the Sherman Act and Robinson-Patman Act claims arising from the Wagon Master franchise program, and the pendent claim for intentional infliction of economic harm. MPW does not appeal the directed verdict against it on its misrepresentation claim. MPW also contends that the trial court erred in denying judgment notwithstanding the verdict or a new trial on its Robinson-Patman Act claims arising from Facet's sales to Keystone, and its breach of contract claim. Finally, MPW asserts that postjudgment interest, if any, should be assessed pursuant to current law, and that the district court's grant of attorneys' fees was excessive and constituted an abuse of discretion.

I. Claims Concerning the Wagon Master Franchise Program

In April, 1976, as the result of a settlement in lengthy litigation between the Federal Trade Commission and the Bendix Corporation, appellee Facet was created to compete with Bendix in the automotive aftermarket. As part of the settlement, Bendix transferred to Facet the sales operation for P & D brand auto parts, to be overseen by Facet's P & D Automotive Division ["P & D"]. In the fifty years prior to Facet's assumption of the P & D sales operation, Bendix' P & D component had manufactured and then sold its parts primarily to warehouse distributors ["WDs"] such as MPW, who in turn resold the merchandise to jobbers. Under Facet, P & D no longer had the profit margin associated with the manufacture of products, and found itself competing directly with manufacturers for the sale of parts to warehouse distributors. As a consequence, P & D continually lost money.

From Facet's creation in 1976 until August, 1980, P & D's primary method of distributing its products was through sales to WDs such as MPW. MPW operates 13 regional warehouses in the Gulf Coast area.

In January, 1980, Facet advised P & D's management that it must take steps to make the division profitable. P & D thereafter decided to augment its distribution system by establishing a franchise marketing program known as the "Wagon Master Plan." The plan envisioned direct sales of a limited number of high turnover P & D products to the jobber and retail dealer markets by P & D franchisees, who would operate from trucks stocked with the requisite inventory. Such a marketing scheme, which bypasses the WD market, was successful for one of Facet's customers, and was working in other markets as well.

P & D did not anticipate terminating its relationships with any of its WD customers and, indeed, up to the time of trial, it continued to service over 400 WDs. Rec., Vol. XI at 13. P & D predicted, however, that up to 90% of its WD customers would seek other sources of supply once the Wagon Master program became operational. P & D's predictions were amazingly accurate: within a year after the franchise program became operational, P & D had lost between 75-90% of its WD business. Rec., Vol. XI at 13, 80; Vol. XVII at 110.

In the event WD customer losses occurred as predicted, P & D anticipated considerable cost savings through the subsequent trimming down of its full line inventory (approximately 4,000 parts had to be stocked in order to service the WD market) to a limited number (approximately 600) of high turnover items. P & D also anticipated cost savings from the eventual paring down of its sales force from 60 salesmen to as few as five or six, inasmuch as franchisees would not require ongoing sales and field assistance as did large WD customers like MPW.

Facet's management approved the franchise concept in March of 1980. Only a few managerial level P & D employees knew about the plan prior to corporate approval. After such approval, Facet discussed the plan with its zone managers, who directed the P & D sales force, in April 1980. Thereafter, Facet informed its P & D sales employees of the plan and offered them an opportunity to acquire franchises. Approximately 35 of the company's 60 salesmen eventually became franchisees. Prospective franchisees were required to sign a nondisclosure agreement before they could learn about the new program. Despite such efforts to prevent dissemination of the plan, MPW learned about the franchise program on or about June 11, 1980. The franchise plan was due to become operational in August, 1980.

MPW contends that Facet and its prospective franchisees conspired to set franchisee prices at levels approximately 35% lower than WD prices, and agreed that Facet would maintain prices charged to MPW and other WDs at then current levels, giving the franchisees immense competitive advantage. MPW also contends that Facet and its prospective franchisees agreed that necessary sales assistance to the WDs would be curtailed in order to drive WDs out of the business of selling P & D products.

After learning of the franchise plan, including details of the alleged price fixing, MPW contacted Standard Motor Products ["Standard"]--a competitor of P & D which already supplied seven of MPW's thirteen warehouses--and decided to make Standard its new supplier in its six remaining warehouses, all of which then stocked P & D products. In July, 1980, Standard lifted all but a fraction of MPW's P & D inventory in those six warehouses and replaced it with Standard products. MPW claims that it was forced to change suppliers in order to mitigate its damages. Although MPW contends that the franchisees entered the market in April and were actively competing for MPW's customers at that time, the trial court found, and the evidence reflects, that no Wagon Master sales were made until August, 1980, after MPW had unilaterally terminated its relationship with Facet.

MPW asserted the following five claims against Facet with respect to the Wagon Master franchise program:

1) that Facet and its prospective franchisees unlawfully conspired to fix prices and to boycott MPW, which constituted per se violations of Section 1 of the Sherman Act;

2) that Facet unreasonably restrained trade, in violation of Section 1 of the Sherman Act under the Rule of Reason;

3) that Facet violated the Robinson-Patman Act by offering discriminatory prices, terms and promotional services to its franchisees in order to give them a competitive advantage;

4) that Facet intentionally interfered with MPW's contract rights and its ability to serve its customers, which constituted intentional infliction of economic harm; and

5) that Facet breached its contract with MPW with respect to provision of sales help, merchandise returns, change-over assistance, payment terms, catalogs and cooperative advertising.

The trial court directed a verdict against MPW on the first four claims. The standard of review in assessing whether a verdict should have been directed is the same standard applied by the trial court in passing on a motion for directed verdict initially, i.e., whether the evidence is sufficient to create an issue for the jury. Swearngin v. Sears Roebuck & Co., 376 F.2d 637, 639 (10th Cir.1967). The trial court may direct a verdict only where the evidence and all inferences to be drawn therefrom are so clear that reasonable minds could not differ on the conclusion. Taylor v. Gilmartin, 686 F.2d 1346 (10th Cir.1982), cert. denied, 459 U.S. 1147, 103 S.Ct. 788, 74 L.Ed.2d 994 (1983). The evidence must be viewed in the light most favorable to the party against whom the directed verdict is sought, and if, on the basis of...