Unibrand Tire & Product Co. v. Armstrong Rubber Co.
Decision Date | 04 April 1977 |
Docket Number | Civ. No. 74-500. |
Citation | 429 F. Supp. 470 |
Court | U.S. District Court — Western District of New York |
Parties | UNIBRAND TIRE & PRODUCT CO., INC., on behalf of itself and all others similarly situated, Plaintiff, v. The ARMSTRONG RUBBER COMPANY, Defendant. |
COPYRIGHT MATERIAL OMITTED
Stephen R. Lamantia, Lamantia, Gelacak & Swartzbaugh, Buffalo, N. Y., for plaintiff.
Stephen H. Kelly, Hodgson, Russ, Andrews, Woods & Goodyear, Buffalo, N. Y., for defendant.
Plaintiff ("Unibrand") on behalf of itself and all others similarly situated1 commenced the present action against defendant ("Armstrong") as the result of the refusal by Armstrong to deal with Unibrand in the sale of off-the-road, industrial and farm tires. The Complaint was filed under Section 4 of the Clayton Act (15 U.S.C. § 15) to recover treble damages which Unibrand claims to have sustained by reason of alleged violations by Armstrong of Sections 1 and 2 of the Sherman Antitrust Act (15 U.S.C. §§ 1 and 2).
Armstrong has moved against the complaint for its alleged failure to state a cause of action. As to the first cause of action2 defendant sets forth that in order to state a cause of action under Section 1 of Sherman Antitrust Act, a "contract, combination or conspiracy" must be sufficiently alleged. It is contended that the complaint is deficient in this respect. In this posture, all factual allegations of the complaint must be accepted as true. George W. Warner & Co., Inc. v. Black & Decker Mfg. Co., 277 F.2d 787 (2d Cir. 1960).
The complaint sets forth that Armstrong is the sixth largest manufacturer of tires in the United States and has annual tire sales in excess of $200,000,000 per year. It manufactures off-the-road, industrial, farm and passenger car tires and sells these tires in interstate commerce and is a major factor in the national markets for off-the-road, industrial and farm tires. Unibrand is a distributor and franchisee of the El Dorado Tire Company, the owner of the name "El Dorado" which is one of the private brand names of off-the-road, industrial and farm tires manufactured by Armstrong.
Prior to the commencement of this action, shortages had developed in the wholesale supply of off-the-road, industrial and farm tires and, contemporaneously, there had been a substantial oversupply of replacement passenger car tires. Armstrong, in order to capitalize on its market power or leverage resulting from such shortages, adopted a uniform business practice of conditioning the sale of off-the-road, industrial and farm tires upon the purchase of replacement passenger car tires. Armstrong threatened that failure to abide by this uniform business practice would cause the termination of the sales of off-the-road, industrial and farm tires to Unibrand and Armstrong did so terminate as to Unibrand and other members of the class represented by it. Some of Armstrong's customers, including one or more El Dorado franchisees, agreed to these demands and for a time purchased replacement passenger car tires in order to obtain off-the-road, industrial and farm tires. It is not alleged that Unibrand at any time purchased any replacement passenger car tires under Armstrong's said uniform business practice.
Unibrand brought this action October 21, 1974. To this date no application has been made for certification as a class action.
The sufficiency of a complaint is appraised under Fed.R.Civ.Proc. rule 8(a) which reads in pertinent part:
"A pleading which sets forth a claim for relief * * * shall contain * * (2) a short and plain statement of the claim showing that the pleader is entitled to relief * * *."
This does not require a plaintiff to set out in detail all the facts upon which he bases his claim. Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). Nor does the rule require a precise statement of all elements that give rise to a legal basis for recovery. The complaint must, however, contain sufficient factual allegations from which every material point necessary to sustain recovery can be drawn.
Unibrand admits that an allegation of a contract, combination or conspiracy is necessary to the pleading of a cause of action under Section 1, but contends that its factual allegations are sufficient to that end. At paragraph 23 in the complaint, its allegation of a contract, combination or conspiracy is summarized as follows:
The specific conduct and acts thus referred to are stated as follows:
Based upon these factual allegations Unibrand urges that the contract, combination or conspiracy requirement is satisfied either by the tie-in agreements which Armstrong extracted from some of its customers or by its activities in implementation of its tie-in policy.
Although Armstrong questions the sufficiency of Unibrand's complaint as to the allegation of illegal tying arrangements, Unibrand has sufficiently alleged that Armstrong's policy was an attempt to elicit agreements to an illegal tying arrangement. International Salt Co. v. United States, 332 U.S. 392, 68 S.Ct. 12, 92 L.Ed. 20 (1947); Coniglio v. Highwood Services, Inc., 495 F.2d 1286 (2d Cir. 1974), cert. denied 419 U.S. 1022, 95 S.Ct. 498, 42 L.Ed.2d 296 (1975). Because it is not alleged that Unibrand purchased any of the tied products, it has no direct claim for relief from the tying arrangement under Section 3 of the Clayton Act (15 U.S.C. § 14). Rather, it is limited to relief under Sherman Antitrust Act § 1 and § 2 (15 U.S.C. §§ 1 and 2).
Pursuant to Section 1, every contract, combination or conspiracy which unreasonably restrains interstate or foreign trade or commerce is illegal. In order to establish a violation of this section, a plaintiff must allege and prove as elements interstate or foreign commerce, two or more parties, an agreement, a restraint of trade, and the unreasonability of such restraint. In private suits for injuries, it must be alleged additionally that a plaintiff's injury arises by reason of the violation of the antitrust laws. Clayton Act § 4, 15 U.S.C. § 15.
The Supreme Court has recognized limitations to recovery.
"The lower courts have been virtually unanimous in concluding that Congress did not intend the antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation." Hawaii v. Standard Oil Co., 405 U.S. 251, 263, 92 S.Ct. 885, 891, 31 L.Ed.2d 184 (1973).
Plaintiff must show itself to be within the sector of the economy in which the violation threatened a breakdown of competitive conditions.
The area of the economy threatened with a breakdown of competitive conditions because of a tying agreement is the market for the tied product, and those who will be proximately injured thereby — in addition to the party subject to the tie — are the competitors in the tied product.
Unibrand has not directly been injured by the tying arrangement. Its injury, if any, arises from Armstrong's refusal to deal with Unibrand unless the latter entered into the tying arrangement.
Armstrong's activity may fall within the ever decreasing scope of the holding in United States v. Colgate & Co., 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992 (1919), which finds no violation of antitrust laws where there has been a unilateral refusal to deal. Although the holding in Colgate has been often criticized and has been eroded almost to extinction, it is still true that a mere refusal to deal, without more, is not a Sherman Act violation. G.A.F. Corporation v. Circle Floor Co., 329 F.Supp. 823 (S.D.N.Y.), aff'd, 462 F.2d 752 (2d Cir. 1971), cert. dismissed, 413 U.S. 901, 93 S.Ct. 3058, 37 L.Ed.2d 1045 (1973); House of Materials, Inc. v. Simplicity Pattern Co., 298 F.2d 867 (2d Cir. 1962). This "without more" qualification has been applied ever more strictly with each subsequent case to the point where the Colgate doctrine is of questionable viability.
Nevertheless, while unilateral refusals to deal per se are legally protected, an examination of them in their respective market contexts in light of the broader business policies of which they are part may find them to be in violation of the antitrust laws. In Lorain Journal Co. v. United States, 342 U.S. 143, 72 S.Ct. 181, 96 L.Ed. 162 (1951), a unilateral refusal to deal for the purpose of creating or maintaining a monopoly was held to violate Section 2 of the Sherman Antitrust Act. In other instances findings of concerted activity have resulted in apparent unilateral refusals to deal being construed as furnishing the necessary element of a contract, conspiracy or combination under Sherman § 1. Albrecht v. Herald Co., 390 U.S. 145, 88 S.Ct. 869, 19 L.Ed.2d 998 (1968), rev'g 367 F.2d 517 (8th Cir. 1966); United States v. Parke, Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 (1960).
A paradox would exist if a supplier is permitted to cut-off a customer after an unsuccessful and coercive attempt to extract an agreement violative of antitrust laws but is not allowed to refuse to continue to deal with an initially acquiescing...
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