Consolidated Metal Products, Inc. v. American Petroleum Institute

• Decision Date: 06 June 1988
• Docket Number: No. 87-1200,87-1200
• Citation: 846 F.2d 284
• Parties: , 1988-1 Trade Cases 68,051 CONSOLIDATED METAL PRODUCTS, INC., Plaintiff-Appellant, v. AMERICAN PETROLEUM INSTITUTE, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 284

846 F.2d 284

56 USLW 2709, 1988-1 Trade Cases 68,051

CONSOLIDATED METAL PRODUCTS, INC., Plaintiff-Appellant, v. AMERICAN PETROLEUM INSTITUTE, Defendant-Appellee.

No. 87-1200.

United States Court of Appeals, Fifth Circuit.

June 6, 1988.

Philip J. Hirschkop, Jonathan R. Mook, Alexandria, Va., for plaintiff-appellant.

James J. Bierbower, Roy D. Snyder, Jr., Wash., D.C., for American.

Arnold S. Block, Wash., D.C., for Dover Corp.

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

Before WISDOM, GARWOOD, and JONES, Circuit Judges.

WISDOM, Circuit Judge:

In this suit, Consolidated Metal Products, Inc., a manufacturer of oil well equipment, contends that the American Petroleum Institute ("API"), a trade association representing all sectors of the domestic petroleum industry, delayed trade standard certification to certain equipment manufactured by Consolidated and thereby excluded it from the market in violation of section 1 of the Sherman Act. 15 U.S.C. Sec. 1. After a thorough review of the evidence, the district court granted summary judgment for API. Although Consolidated offered evidence that API had no basis to conclude that its equipment would not perform up to trade standards, the district court found this insufficient to raise a genuine issue of fact material to whether the delay was a conspiracy in restraint of trade. Consolidated appeals.

The principal question in this case is whether unjustified denial of a valuable product certification by a standard-setting body, without more, violates section 1 of the Sherman Act. We hold that it does not and affirm the judgment of the district court.

I.

Sucker rods are part of the equipment used to pump oil from wells having low natural pressure. A pump jack at the surface imparts an up-and-down motion to a sucker rod string that extends through the tubing of the well to a pump submerged in the fluid of the well. Each sucker rod is 25 to 30 feet long, 1/2 to 1 1/8 inches in diameter, and has coupler heads on each end. The heads allow the rods to be strung together inside the tubing until they reach the submerged pump.

Conventional sucker rods are manufactured of a single piece of steel. First, steel is forged into a shaft. Then, the ends of the shaft are hot-forged into coupler heads, making a one-piece sucker rod.

In 1980, when domestic oil production and the demand for sucker rods were at record levels, Consolidated developed an innovative method for manufacturing the rods. Using its patented high-strength steel, Consolidated manufactured the rods in three individual pieces: the steel shaft and two threaded coupler heads. Consolidated then roll-threaded the coupler heads onto the steel shaft. Because this process eliminated the costly hot-forging required by the conventional design, Consolidated's rods were cheaper to produce than conventional rods. Consolidated began marketing its rods in 1981, and that year sold nearly 12 million feet of them--a substantial amount.

In addition to its various other activities, API is the only domestic body that sets standards for oil field equipment. Equipment manufacturers may apply to API for approval of their products and, if API finds that the equipment meets its standards, it will (for an annual fee) grant a license to display the API monogram on the equipment. The monogram is a registered trademark of API. By using it, the licensee warrants to purchasers that the monogrammed product complies with API specifications. The API monogram has commercial value in that its use enhances product sales.

API has been setting standards for, and approving, sucker rods since at least 1927. API approval of products is not, however, required by any law and oil field equipment, including sucker rods, is sold without it.

Consolidated had been selling sucker rods without the API monogram for some time when, after several initial inquiries, it formally applied to API for approval of its innovative rod design on June 1, 1981. Around the same time, other manufacturers who had been marketing unconventional sucker rods also applied for API approval. These other new rods included a three- piece design in which the coupler heads were welded, rather than roll-threaded, onto the steel shaft.

J.M. Spanhel of the API production department staff was authorized to grant or deny sucker rod manufacturers the license to use the API monogram. ¹ Spanhel was familiar with the three-piece threaded design from Consolidated's earlier inquiries with API. He told Consolidated that he thought its design was not contemplated by API's sucker rod specifications, contained in API Spec. 11B, ² but nonetheless arranged for Consolidated to make presentations to API's sucker rod standards committee.

The sucker rod standards committee referred the applications of Consolidated and the other three-piece rod manufacturers to the manufacturer subcommittee. After hearing presentations by the applicants, the manufacturer subcommittee deferred all action to the user subcommittee. The user subcommittee met on June 24, 1981 to consider the various applications and heard presentations by several sucker rod manufacturers, including Consolidated. Spanhel asked the user subcommittee to determine how the requirements of Spec. 11B should be applied to Consolidated's rod. The minutes of that meeting state:

The User Subcomittee unanimously agreed that there is no current justification for the appointment of a task group to investigate the writing of specifications for sucker rods which do not meet the current [Spec.] 11B specifications. This Subcommittee encourages all potential manufacturers to continue to develop new products. This Subcommittee has concurred that sucker rods can be welded in a manner that meets the current [Spec.] 11B specifications. This Subcommittee believes that Consolidated Metal's sucker rods do not meet 11B specifications because of tensile strength characteristics.

At this point API and Consolidated began their long and heated dispute over whether Spec. 11B did or did not "cover" Consolidated's three-piece threaded design and whether the user subcommittee made any determination on the matter. API contends that the user subcommittee's interest in tensile strength in part reflects a concern with the strength of the threaded joint between the shaft and heads in Consolidated's design, a concern Spanhel also held. In any event, API contends, Spanhel understood the user subcommittee's ruling, reasonably, as either rejecting or tabling Consolidated's application for product approval. Accordingly, API contends, Spanhel's own judgment in the matter was confirmed and he justifiably refused to grant Consolidated's application for the monogram.

Consolidated, on the other hand, contends that Spec. 11B "covered" its design because it did not specifically exclude threaded-on coupler heads. Consolidated also insists that the user subcommittee's concern with tensile strength could be addressed merely by changing the type of steel in the rod and had nothing to do with the threaded joints. Spanhel, Consolidated contends, should have known this and could not reasonably have understood the user committee's statements as accepting any delay in API approval of Consolidated's rod.

On several occasions during the three months after the June 1981 standards meeting, Consolidated and API discussed the possible approval of Consolidated's rods. Consolidated continued to press for approval, insisting that Spec. 11B "did not exclude" its design, and Spanhel, for API, continued to insist upon more time to study the performance of the three-piece threaded rod. In September 1981, after Consolidated threatened to sue, API set up a standards subcommittee to consider revising Spec. 11B to incorporate the three-piece threaded design. The discussions between Consolidated continued unchanged in both acrimony and substance. API completed and approved specifications for three-piece threaded rods on January 14, 1983 and formally licensed use of its monogram on Consolidated's rod on April 15, 1983.

Seven days later, on April 22, 1983, Consolidated filed the complaint in this case, alleging a conspiracy between Continental Emsco, Inc., Dover Corporation (both established manufacturers of conventional sucker rods), API, and several unnamed co-conspirators. All were listed as defendants. Consolidated's complaint, the defendants' responses, and two years of discovery have focussed on whether it was "reasonable" for API to delay Consolidated a monogram license from June 1981 to April 1983. The district court granted summary judgment in favor of all the defendants. Consolidated appeals only the judgment for API.

II.

Rule 56(c) of the Federal Rules of Civil Procedure permits summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that the moving party is entitled to a judgment as a matter of law". Rule 56(e) provides:

When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but ... must set forth specific facts showing that there is a genuine issue for trial.

Only disputes over material facts, facts that might affect the outcome of the lawsuit under the governing substantive law, will preclude summary judgment. ³

It is true that summary judgment is less common in antitrust cases than in other cases, but this is not because different rules apply to those cases. ⁴ Rather, it is because the relevant factual disputes in antitrust cases are typically more complicated that those in other cases. ⁵ Accordingly, it is typically more difficult for the trial court to resolve all doubt about the merits of an antitrust claim on the basis of the written, pre-trial record alone. ⁶ But this is certainly not always so.

In Matsushita Electric Industrial Co....