787 F.2d 1252 (8th Cir. 1986), 85-1212, Pumps and Power Co. v. Southern States Industries, Inc.

Docket Nº:85-1212.
Citation:787 F.2d 1252
Party Name:PUMPS AND POWER COMPANY, Appellee, v. SOUTHERN STATES INDUSTRIES, INC., Appellant.
Case Date:April 03, 1986
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

Page 1252

787 F.2d 1252 (8th Cir. 1986)

PUMPS AND POWER COMPANY, Appellee,

v.

SOUTHERN STATES INDUSTRIES, INC., Appellant.

No. 85-1212.

United States Court of Appeals, Eighth Circuit

April 3, 1986

Submitted Oct. 14, 1985.

Rehearing Denied May 8, 1986.

Page 1253

Henry N. Means, III, Little Rock, Ark., for appellant.

Ian W. Vickery, El Dorado, Ark., for appellee.

Before ROSS, Circuit Judge, BRIGHT, Senior Circuit Judge, and BOWMAN, Circuit Judge.

ROSS, Circuit Judge.

This case concerns the restricted distribution of "T-Series pumps" manufactured by the Gorman-Rupp Company of Mansfield, Ohio for use as the key component of certain sewage treatment equipment known as pump lift stations. Appellee, Pumps and Power Company of El Dorado, Arkansas, builds a self-priming, top-mounted suction lift station which it markets as the Pumper Pack to cities and other subdivisions (end-users) engaged in waste water treatment operations. Pumps and Power purchases (rather than manufactures) the component parts of the Pumper Pack. Because of promotional and service efforts by Gorman-Rupp and its distributors as well as the inherent quality of the product, the Gorman-Rupp T-Series pump is apparently a highly desirable component of the kind of pump lift station marketed by Pumps and Power.

Pumps and Power initially filed suit under sections 1 and 2 of the Sherman Act, 15 U.S.C. Secs. 1, 2 (1982), against Gorman-Rupp

Page 1254

and two of its distributors, Menge Pump and Machinery Company and appellant, Southern States Industries, alleging a concerted refusal to deal with Pumps and Power in the sale of Gorman-Rupp T-Series pumps. While there are at least five or six other manufacturers of functionally equivalent pumps, Pumps and Power considers itself at a competitive disadvantage in the lift station product market by its lack of access to Gorman-Rupp pumps, referred to in the record as the "cadillac of pumps."

Shortly before trial, Gorman-Rupp and Menge Pump and Machinery Company settled with appellee. Pumps and Power tried the case against the remaining defendant, Southern States, under section 1 of the Sherman Act and won a jury verdict of $10,000 which was then trebled. 15 U.S.C. Sec. 15 (1982). Southern States appeals the district court's denial of its motions for directed verdict and judgment notwithstanding the verdict. Because we find that the record lacks sufficient evidence of concerted action involving appellant, Southern States, to support the jury's verdict, we reverse.

I.

Between 1959 and 1972, Gorman-Rupp sold sewage lift station pumps to Pumps and Power pursuant to a waste water equipment sales agreement. During this period, Pumps and Power distributed Gorman-Rupp pumps and, after 1965, marketed its own lift stations. Not long after Pumps and Power developed the Pumper Pack, Gorman-Rupp began to manufacture its own lift stations. Then in 1972, Gorman-Rupp terminated Pumps and Power's distributorship agreement 1 but permitted appellee to continue to purchase pumps as an original equipment manufacturer (O.E.M.). O.E.M. status meant that while Pumps and Power could no longer acquire Gorman-Rupp pumps for resale, it could purchase them for installation into the Pumps and Power lift station product. As an O.E.M., Pumps and Power received a discount and a ready supply of Gorman-Rupp pumps. In addition, Pumps and Power was able to purchase pumps from Gorman-Rupp distributors at an even greater discount than that offered by the manufacturer. Therefore, Pumps and Power was satisfied with its position as a Gorman-Rupp approved O.E.M. until 1979 when Gorman-Rupp decided to cease selling its pumps to original equipment manufacturers entirely.

In a letter dated October 5, 1979, Gorman-Rupp notified Pumps and Power as well as other customers who assembled package lift stations incorporating Gorman-Rupp pumps that effective January 1, 1980, Gorman-Rupp would no longer sell its sewage pumps to lift station original equipment manufacturers. The decision to cease pump sales to O.E.M.'s grew out of Gorman-Rupp's prior entry into the sewage lift station market as a direct competitor, through its distributors, of Pumps and Power and other sellers of sewage lift stations.

Pumps and Power continued to find distributors who were willing to supply it with Gorman-Rupp pumps. However, in August 1982, Gorman-Rupp issued a policy statement to all of its distributors containing the following language:

In 1979, we decided to stop selling our pumps to manufacturers who installed the pumps in their own lift stations, which they thereafter sold in competition with us. We also incorporated this as a policy for all our distributors. We did this for two reasons. First, our Waste Water distributors work very hard to assist the engineering firm hired by the end user both to design the lift station desired by the user and to specify our pump for use in that station. Other manufacturers frequently do not incur this engineering cost and, as a result, could bid against us at a lower price if they could obtain our pumps. This "free ride" would cause financial loss both to our distributors and to us. We also believed that sales to other manufacturers

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would make our Waste Water distributors hesitant in the...

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