Thurman Industries, Inc. v. Pay 'N Pak Stores, Inc.

• Decision Date: 22 May 1989
• Docket Number: No. 87-4399,87-4399
• Citation: 875 F.2d 1369
• Parties: , 1989-1 Trade Cases 68,592 THURMAN INDUSTRIES, INC., Plaintiff-Appellant, v. PAY 'N PAK STORES, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1369

875 F.2d 1369

57 USLW 2721, 1989-1 Trade Cases 68,592

THURMAN INDUSTRIES, INC., Plaintiff-Appellant, v. PAY 'N PAK STORES, INC., Defendant-Appellee.

No. 87-4399.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 6, 1989.

Decided May 22, 1989.

Earle J. Hereford, Jr., Culp, Guterson & Grader, Seattle, Wash., for plaintiff-appellant.

Marvin L. Gray, Jr., Davis, Wright & Jones, Seattle, Wash., for defendant-appellee.

Appeal from the United States District Court for the Western District of Washington.

Before HUG, NORRIS and THOMPSON, Circuit Judges.

HUG, Circuit Judge:

This case presents multiple antitrust claims arising from defendant's purchasing and marketing practices in its operation of "home center" stores in the Seattle, Washington area. Plaintiff appeals the dismissal by summary judgment of its claims for conspiracy in restraint of trade and actual monopolization under Sherman Act Secs. 1 and 2, and the stipulated dismissal of its attempted monopolization claim under Sherman Act Sec. 2 following the district court's pre-trial order excluding certain evidence on the attempt claim. This appeal requires us to resolve two issues: whether plaintiff has raised a genuine issue of material fact as to the definition of the relevant product market that supports the conspiracy and actual monopolization claims; and whether the district court abused its discretion in excluding evidence on the attempted monopolization claim. We resolve both issues against the plaintiff and affirm.

FACTUAL AND PROCEDURAL BACKGROUND

The dispute underlying this lawsuit began after management discord forced Stan Thurman to resign as the chief executive officer of defendant Pay 'N Pak, Inc. ("Pay 'N Pak"). Later, Mr. Thurman founded plaintiff Thurman Industries, Inc. ("Thurman"), which became a competitor of Pay 'N Pak. Thurman and Pay 'N Pak According to Thurman, Pay 'N Pak and Thurman were two of roughly seven to eight businesses in the Seattle area that offered the unique combination of goods and services characteristic of a home center during the period set out in the complaint. Pay 'N Pak operated twenty-five stores in the Seattle area and a total of 100 or more stores throughout sixteen states. Thurman operated a total of ten stores--six in Seattle and four in other Washington communities. Thurman's affidavits and exhibits identify Pay 'N Pak as having held the second-largest share (or 20 to 30 percent) of retail sales by home centers in Seattle and the largest share among buyers of home center merchandise because of Pay 'N Pak's practice of purchasing merchandise for all of its 100 or more stores through a single distribution point in Seattle. In contrast, Pay 'N Pak's affidavits and exhibits show that its share of retail sales in home improvement products sold by both home centers and all other vendors in the Seattle area was less than ten percent. The affidavits and exhibits of both parties agree that the share of sales of particular goods by home centers as opposed to other vendors varied with the type of product, tool, or supply being offered for sale.

are retail chains operating "home center" stores, which sell tools, supplies, and other products for the building, electrical, and plumbing needs of individuals engaged in household remodeling and repair projects. Identical or competing brands of the products sold by home centers are available at hardware, specialty, or department stores and other retail vendors. The principal difference between home centers and other vendors lies in the wide variety of products offered by home centers and the presence of trained and knowledgeable home center sales staffs who can assist individuals with product selection and project implementation.

Thurman's allegations against Pay 'N Pak focus on Pay 'N Pak's use of its size as a buyer of home improvement merchandise to secure competitive advantage in the market for retail sales by home centers. The allegations identify anticompetitive conduct by Pay 'N Pak of three general varieties: (1) pressuring product suppliers and dealers to refuse to deal with Thurman, (2) predatorily pricing certain home improvement items, and (3) knowingly obtaining preferential pricing and other terms from various dealers and suppliers. This behavior, according to Thurman, violated Sherman Act Sec. 1's prohibition against conspiracies in restraint of trade, Sherman Act Sec. 2's ban of actual or attempted monopolization, and the Robinson-Patman Act. See 15 U.S.C. Secs. 1, 2, 13 (1982). The complaint also alleges violations of state antitrust laws and state law business torts.

Following extended discovery by both parties, Pay 'N Pak sought summary judgment on all Sherman Act claims and some of Thurman's other claims not relevant to this appeal. The district court concluded that Thurman had failed, as a matter of law, "to establish a relevant product market for the purpose of assessing liability under the [Sherman Act]." As a result, the court granted summary judgment dismissing the actual monopolization claim and the claim for conspiracy in restraint of trade. The court concluded that the lack of triable issues on product market definition was not fatal to the attempted monopolization claim because Thurman had raised triable issues on its predatory pricing allegations, making market proof unessential to the attempt claim. Both parties moved for reconsideration, but the district court denied these motions insofar as they concerned the Sherman Act claims.

Thurman then moved for an order that evidence of Pay 'N Pak's conduct other than predatory pricing would be admissible on the issues of anticompetitive conduct and specific intent to monopolize at trial of the attempted monopolization claim. The district court found the evidence inadmissible largely because the alleged conduct was ambiguous in its anticompetitive nature and therefore impermissible as a basis for inferring intent. Following this ruling, Thurman stipulated that unless it obtained substantial reversal of the Sherman Act rulings on appeal, it would not try the attempted monopolization charge. The district

court then entered an order under Fed.R.Civ.P. 54(b) directing the entry of final judgment dismissing all Sherman Act claims and certifying that immediate appellate review of the Sherman Act rulings would facilitate ultimate disposition of the case.

DISCUSSION

I. Conspiracy and Monopolization Claims; Sherman Act Secs. 1 and 2

The claims for conspiracy in restraint of trade and actual monopolization were dismissed by summary judgment. We review a grant of summary judgment de novo and evaluate the evidence most favorably to the non-moving party to determine whether any genuine issues of material fact remain and whether the district court correctly applied the relevant substantive law. Christofferson Dairy, Inc. v. MMM Sales, Inc., 849 F.2d 1168, 1171 (9th Cir.1988). Although this circuit generally disfavors summary judgment in antitrust cases, it is appropriate when the non-moving party fails to present a record adequate to support a favorable finding. Id.; see also California Architectural Bldg. Prod., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir.1987), cert. denied, --- U.S. ----, 108 S.Ct. 698-99, 98 L.Ed.2d 650 (1988).

A. The Need for Market Definition

Sherman Act Sec. 1 prohibits conspiracies and agreements that unreasonably restrain trade. 15 U.S.C. Sec. 1 (1982); Business Elec. Corp. v. Sharp Elec. Corp., 485 U.S. 717, 108 S.Ct. 1515, 1519, 99 L.Ed.2d 808 (1988). Courts evaluate the reasonableness of a restraint under either per se analysis or the rule of reason. Oltz v. St. Peter's Community Hosp., 861 F.2d 1440, 1445 (9th Cir.1988). On appeal, Thurman abandoned its position that Pay 'N Pak's conduct was per se unlawful. Thus, we confine our analysis of the section 1 claim to the rule of reason.

To succeed under the rule of reason, a section 1 claimant must establish three elements: "(1) an agreement or conspiracy among two or more persons or distinct business entities; (2) by which the persons or entities intend to harm or restrain competition; and (3) which actually restrains competition." Id. at 1445 (citing Los Angeles Memorial Coliseum Comm'n v. National Football League, 726 F.2d 1381, 1391 (9th Cir.), cert. denied, 469 U.S. 990, 105 S.Ct. 397, 83 L.Ed.2d 331 (1984)). After these elements are established, the factfinder must weigh the procompetitive and anticompetitive effects of the challenged restraint and thoroughly examine all of the surrounding circumstances to determine whether the restraint is unreasonable. Id.

Proving injury to competition ordinarily requires the claimant to prove the relevant geographic and product markets and to demonstrate the effects of the restraint within those markets. Id. at 1446; Kaplan v. Burroughs Corp., 611 F.2d 286, 291 (9th Cir.), cert. denied, 447 U.S. 924, 100 S.Ct. 3016, 65 L.Ed.2d 1116 (1980). Avoiding the need for such elaborate market analysis requires the claimant to show actual detrimental effects on competition such as output decreases or price increases caused by the restraint. Oltz, 861 F.2d at 1448 (citing F.T.C. v. Indiana Fed'n of Dentists, 476 U.S. 447, 460, 106 S.Ct. 2009, 2018-19, 90 L.Ed.2d 445 (1986)). Thurman has advanced no evidence showing clear competitive injury from any of Pay 'N Pak's alleged behavior. Thus, market analysis is essential to its conspiracy claim under section 1.

Market analysis is also essential to Thurman's monopolization claim under Sherman Act Sec. 2, 15 U.S.C. Sec. 2 (1982). Such a claim is composed of two elements: (1) the defendant's possession of monopoly power in the relevant market and (2) the defendant's willful acquisition or maintenance of such power. Oahu Gas Serv., Inc. v. Pacific Resources, Inc., 838 F.2d 360, 363 (9th Cir.), cert. denied, --- U.S. ----, 109 S.Ct. 180, 102 L.Ed.2d 149 (1988). As the language of the first element...