Smalley & Co. v. Emerson & Cuming, Inc., Civ. A. No. 90 N 745.

• Decision Date: 30 September 1992
• Docket Number: Civ. A. No. 90 N 745.
• Parties: SMALLEY & COMPANY, Plaintiff, v. EMERSON & CUMING, INC., Defendant.
• Court: U.S. District Court — District of Colorado

808 F. Supp. 1503

SMALLEY & COMPANY, Plaintiff, v. EMERSON & CUMING, INC., Defendant.

Civ. A. No. 90 N 745.

United States District Court, D. Colorado.

September 30, 1992.

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Daniel R. Satriana, Jr. and Sean R. Gallagher of Hall & Evans, Denver, Colo., for plaintiff.

Larry L. Theis and Bobbee J. Musgrave from Walters & Theis, Denver, Colo., for defendant.

ORDER AND MEMORANDUM OF DECISION

NOTTINGHAM, District Judge.

Plaintiff Smalley & Company is a distributor of adhesives and sealants. Defendant Emerson & Cuming manufactures adhesives and sealants. Defendant distributes its products both directly and through distributors. In November 1987, plaintiff entered into a distributor agreement to sell defendant's products. In January 1989 and again in September 1989, Thiokol Corporation, an aerospace company, issued a request for quotation to supply a certain adhesive manufactured by defendant. Thiokol awarded the two contracts to plaintiff. In March 1990, defendant notified plaintiff that the distributor agreement would be terminated effective April 1990. That same month, plaintiff filed this complaint alleging that defendant terminated the distributorship in retaliation for plaintiff's refusal to participate in a bid-rigging scheme to supply defendant's products to Thiokol. Plaintiff asserts antitrust claims for price fixing, allocation of the market, monopolization, conspiracy to monopolize, and attempt to monopolize in violation of the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1, 2 (West 1988). Plaintiff's Amended Complaint also includes several other claims for relief: breach of contract, promissory estoppel, tortious interference with prospective contract, and violation of the Colorado Restraint of Trade and Commerce Act, Colo.Rev.Stat. §§ 6-4-101 to 108 (1973 & Supp.1991). Jurisdiction is based on both federal question and diversity. 28 U.S.C.A. §§ 1332, 1337 (West Supp.1992).

This matter is now before the court on defendant's motion for summary judgment on all claims. The primary issues are: (1) whether plaintiff has established that defendant's conduct constitutes a per se violation of section 1; (2) whether a single trademarked product sold to one customer can constitute a relevant product market; (3) whether plaintiff's evidence is sufficient to prove that defendant breached any agreement with plaintiff; (4) whether plaintiff's evidence concerning detrimental reliance is sufficient to withstand summary judgment; and (5) whether plaintiff's Colorado antitrust claims must fail because plaintiff's federal claims cannot withstand summary judgment. I conclude that plaintiff has failed to establish a per se violation of section 1. I also conclude that a single trademarked product sold to one customer cannot constitute a relevant product market. Because I find that a proper definition of the relevant market is an element of each of plaintiff's antitrust claims, I grant defendant's motion to dismiss plaintiff's antitrust claims. In addition, plaintiff fails to prove that defendant's termination of the distributorship relationship constituted a breach of any contract, express or implied, between E & C and Smalley. Similarly, plaintiff does not demonstrate the detrimental reliance necessary to establish its promissory estoppel claim. I therefore grant defendant's motion for summary judgment on both the breach of contract and promissory estoppel claims. Finally, due to the substantial similarity between the state and federal antitrust statutes, I grant defendant's motion for summary judgment on the state antitrust claim under the same rationale as the federal antitrust claims.

FACTS

Plaintiff is a wholesale distributor of sealants, adhesives, and coatings used in construction and manufacturing. Defendant manufactures and sells industrial adhesives and sealants. Defendant sells its products both directly to customers and through a distributor network, a marketing system referred to as "dual distribution." On November 1, 1987, the parties entered into a distributor agreement, whereby plaintiff would be a distributor for defendant in Colorado, Arizona, New Mexico, and Utah. The distributorship agreement provided in part that plaintiff would "use its best efforts to promote, maintain and increase the sale of E & C products in the primary geographic area as well as to promote the goodwill of E & C; ... and concentrate its efforts on sales of E & C Products in the primary geographic area to small and medium sized accounts." Memorandum Brief in Support of Defendant's Motion for Summary Judgment, ex. 9 ¶ 3(a) (filed July 9, 1991) hereinafter called Defendant's Brief. The agreement stated that it "shall expire one (1) year from the date thereof ... unless sooner terminated as provided in Paragraph 10 hereof, without liability to the other party (except for amount owing one to the other). It may thereafter be renegotiated for successive periods representatives sic of each party hereto." Id. at ¶ 11. Because the agreement did not contain a paragraph 10 or any other paragraph concerning termination, the reference to paragraph 10 appears to be an error.

One of the numerous adhesives manufactured and sold by defendant is Eccobond 56C, for which defendant owns a federally-registered trademark. Eccobond 56C is a low-resistance electrically conductive adhesive. It is sold to numerous high technology and aerospace customers, including Ford Aerospace, Martin Marietta Corporation, and Thiokol Corporation. Thiokol manufactures solid rocket motor systems for use in missiles and space vehicles, including the space shuttle. When requesting products, Thiokol typically requires that the product comply with the standards set forth in a Procurement Data List (PDL). PDL No. 7566 sets forth the standards for electrically conductive adhesives. See Plaintiff's Response to Defendant's Motion for Summary Judgment, ex. 39 (filed Aug. 8, 1992) hereinafter called Plaintiff's Response. At the time of these events, Eccobond 56C was the only product which complied with the requirements of the PDL No. 7566.

E.V. Roberts ("Roberts") is another company which distributes defendant's products. Defendant, plaintiff, and Roberts have all bid against one another for contracts to supply Eccobond 56C to Thiokol. All three have, at one time or another, contracted with Thiokol to supply Eccobond 56C. From 1987 to early 1988, Roberts raised its bid price in its bids to Thiokol. After 1988, Roberts did not win any contracts with Thiokol. On January 25, 1989, Thiokol issued a request for a firm fixed-price quotation for a low resistance electrically conductive adhesive which complied with the standards set forth in PDL No. 7566. Thiokol received bids from plaintiff, defendant, and Roberts. Thiokol awarded the contract to plaintiff. Plaintiff alleges that defendant's Sales Manager, Mr. Mike Dilworth, told plaintiff that it had no business submitting bids to Thiokol to supply Eccobond 56C.

On September 28, 1989, Thiokol issued another request for quotation for an adhesive which complied with PDL No. 7566. Thiokol again received bids from plaintiff, defendant, and Roberts. Thiokol again awarded the contract to plaintiff. By letter dated December 7, 1989, defendant wrote plaintiff a letter stating that the distributorship agreement had expired and that new negotiations should be initiated. The letter stated that defendant's decision to sign a new contract would depend on an assessment of the sales during the first six months of 1990. Plaintiff's Response, ex. 4. By an agreement dated February 19, 1990, Thiokol and plaintiff entered into a fixed-price redeterminable contract totalling $365,337.50. Plaintiff began supplying, and has continued to supply, defendant's Eccobond 56C pursuant to its contract with Thiokol.

By letter dated March 16, 1990, defendant notified plaintiff that it would terminate the distributor agreement effective April 30, 1990. Plaintiff's Response, ex. 6. Defendant has continued to supply products needed by plaintiff to fulfill contracts made prior to termination of the distributorship. On April 27, 1990, plaintiff filed this complaint alleging various antitrust and state law claims. Plaintiff alleges that defendant terminated the distributor agreement because plaintiff refused to participate in defendant's bid-fixing scheme, and that defendant abused its power by monopolizing, attempting to monopolize, or conspiring to monopolize sales of Eccobond 56C to Thiokol. Plaintiff asserts four separate antitrust claims: (1) a section 1 claim for price-fixing and allocation of customers, (2) a section 2 claim for monopolization, (3) a section 2 claim for conspiracy to monopolize, and (4) a third section 2 claim for attempt to monopolize. Plaintiff also asserts four state law claims: breach of contract, promissory estoppel, tortious interference with prospective contract, and violation of the Colorado Restraint of Trade and Commerce Act. Plaintiff seeks both damages and permanent injunctive relief.

ANALYSIS

Plaintiff's Antitrust Claims

Plaintiff alleges violation of both section 1 and section 2 of the Sherman Anti-Trust Act. 15 U.S.C.A. §§ 1, 2 (West 1973). Section one prohibits contracts and conspiracies that restrain trade. 15 U.S.C.A. § 1 (West 1973). This broad language is tempered by the "rule of reason" under which only unreasonable restraints on trade are treated as violations of section 1. See Reazin v. Blue Cross and Blue Shield, Inc., 899 F.2d 951, 959 (10th Cir.), cert. denied, 497 U.S. 1005, 110 S.Ct. 3241, 111 L.Ed.2d 752 (1990). Section two prohibits monopolization. I will discuss each of plaintiff's antitrust claims, starting with the section 1 claim.

There are two separate types of section 1 violations. If the rule of reason applies, plaintiff must prove that defendant's actions resulted in an unreasonable restraint of trade. Alternatively, plaintiff may prove that defendant's...