Aaron E. Levine & Co., Inc. v. Calkraft Paper Co.

• Decision Date: 09 April 1976
• Docket Number: Civ. A. No. 74-71300.
• Parties: AARON E. LEVINE AND COMPANY, INC., Plaintiff, v. CALKRAFT PAPER COMPANY and Unijax, Inc., Defendants.
• Court: U.S. District Court — Western District of Michigan

429 F. Supp. 1039

AARON E. LEVINE AND COMPANY, INC., Plaintiff, v. CALKRAFT PAPER COMPANY and Unijax, Inc., Defendants.

Civ. A. No. 74-71300.

United States District Court, E. D. Michigan, S. D.

April 9, 1976.

COPYRIGHT MATERIAL OMITTED

Marshall Wallace, Southfield, Mich., Thomas P. Meehan, Kuder, Sherman, Fox & Meehan, Washington, D. C., for plaintiff.

A. Stewart Kerr, Kerr, Wattles & Russell, Detroit, Mich., Thomas Moseley, Cadwalader, Wickersham & Taft, New York City, for defendants.

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS MOTION FOR SUMMARY JUDGMENT

KAESS, District Judge.

This civil action has been brought pursuant to Section 4 of the Clayton Act (15 U.S.C. § 15) to recover treble damages for alleged violations of Section 1 of the Sherman Act (15 U.S.C. § 1). Count II alleges breach of contract in wrongfully refusing to fill shipping orders. Count III charges that the defendant Calkraft's termination of plaintiff's distributorship constitutes a breach of its common law duty to maintain a valuable franchise. Defendants Calkraft, Inc. and Unijax, Inc. have brought this motion for summary judgment. Rule 56, Federal Rules of Civil Procedure.

Plaintiff Aaron E. Levine and Company, Inc. is a Michigan corporation with its principal place of business in Detroit, Michigan. During the time in question Levine was a distributor of kraft products. Kraft is a coarse paper made from wood pulp and used chiefly for grocery bags, merchandise bags and kraft wrap. Aaron Levine and Company, Inc. acted both as a broker, soliciting orders on behalf of principals and also purchased items on its own behalf for later resale. Levine also employed salesmen who solicited customers on its behalf in Michigan, northwest Ohio, and northern Indiana.

Defendant Calkraft Paper Company, a Florida corporation, operated a paper mill and bag plant for the manufacture of kraft products during the time in question. Both the mill and bag plant are located in Louisiana, its principal place of business. Calkraft produced kraft products until July, 1974, when its assets were sold to Boise Southern Corporation. During the time in question, Calkraft was a wholly owned subsidiary of Unijax, Inc. Walter L. Moore acted as President of both corporations. Defendant Unijax, Inc., also a Florida corporation, is a distributor of kraft, paper, and related products. Unijax purchased kraft products from manufacturers and marketed them through branch outlets and affiliated corporations. During the 1970's Unijax and its affiliates maintained approximately thirty branch outlets, chiefly in the southeastern United States.

In December, 1968, Levine was solicited by Calkraft sales representatives to act as a distributor of Calkraft's products in Michigan. At that time, Levine was a distributor of kraft products of Gilman Paper Company. There was never any written agreement between Levine and Calkraft. In accordance with the parties' oral agreement, orders were telephoned or teletyped to the mill, followed by a written order transmitted by mail. Generally, Calkraft returned a written acknowledgement in response, setting forth the shipping date and method of shipment. The plaintiff Levine, expanded his market to the area around Toledo, Ohio and South Bend, Indiana. During the latter part of 1972, the demand for kraft products began to exceed supplies, and kraft prices began to rise rapidly. During February and March of 1973, Calkraft informed Levine that it wished to terminate him as a distributor. Plaintiff alleges that this termination was the result of pressure by Unijax, its parent corporation, to sell a greater volume of products to it at a time of nationwide kraft scarcity. Defendants Calkraft and Unijax insist that they merely withdrew from the Michigan market which became unprofitable due to rising transportation costs from its mill in Louisiana coupled with mandatory price controls which were in effect at the time. On December 5, 1973, Calkraft formally advised Levine that it was terminating their relationship. Plaintiff filed this action on March 19, 1974.

In considering a motion for summary judgment, the record will be viewed in the light most favorable to the party opposing the motion. Poller v. Columbia Broadcasting System, 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962); McHenry v. Ford Motor Co., 269 F.2d 18 (6th Cir. 1959). However, the court may piece the pleadings and determine from the depositions, admissions and affidavits, whether material issues of fact actually exist. Smoot v. Chicago, R. I. & P. R. Co., 378 F.2d 879 (10 Cir. 1967).

Generally, summary judgment should be used sparingly in antitrust litigation. Poller v. Columbia Broadcasting System, Inc., supra, Alles Corp. v. Senco Products, Inc., 329 F.2d 567 (6th Cir. 1964). This does not mean, however, that Rule 56 of the Federal Rules of Civil Procedure is inapplicable in antitrust cases; and when appropriate, summary judgment may be granted. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968).

In First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968), the Supreme Court affirmed that allegations of restraint of trade must be supported by significant probative evidence in order to overcome a motion for summary judgment. In that case, plaintiff had acquired a contractual right to import Iranian oil. He negotiated with Cities Service concerning the purchase of crude oil. Cities abandoned the deal. Plaintiff then sued Cities and seven other companies, alleging a conspiracy to boycott plaintiff's oil. Cities' motion for summary judgment was granted. On appeal the Supreme Court stated:

"To the extent that petitioner's burden-of-proof argument can be interpreted to suggest that Rule 56(e) should, in effect, be read out of antitrust cases and permit plaintiffs to get to a jury on the basis of the allegations in their complaints, coupled with the hope that something can be developed at trial in the way of evidence to support those allegations, we decline to accept it. While we recognize the importance of preserving litigant's rights to a trial on their claims, we are not prepared to extend those rights to the point of requiring that anyone who files an antitrust complaint setting forth a valid cause of action be entitled to a fulldress trial notwithstanding the absence of any significant probative evidence tending to support the complaint." 391 U.S. at 289, 290, 88 S.Ct. at 1593. (Emphasis added).

Accord, Daily Press v. United Press International, 412 F.2d 126 (6th Cir. 1969); Zenith Vinyl Fabrics Corp. v. Ford Motor Company, 357 F.Supp. 133 (E.D.Mich., S.D. 1973), aff'd 1974-2 Trade Cases Para. 75,290 (6th Cir. 1974), cert. denied, 419 U.S. 967, 95 S.Ct. 231, 42 L.Ed.2d 183 (1974).

In the present case, Count I of the plaintiff's complaint charges that Unijax and Calkraft conspired to refuse to deal with plaintiff Levine, in violation of § 1. It is well settled that a refusal to deal, without more does not constitute a violation of the Sherman Act. United States v. Colgate and Co., 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992 (1919); Zenith Vinyl Fabrics Corp. v. Ford Motor Company, supra; Ace Beer Distributors, Inc. v. Kohn, Inc., 318 F.2d 283 (6th Cir. 1963).

A refusal to deal violates Section 1 only if it is done pursuant to a contract, combination or conspiracy and the refusal results in an unreasonable restraint of trade. 15 U.S.C. § 1; United States v. Parke Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 (1960). Thus the Sherman Act requires the concerted actions of two or more persons. As the Supreme Court stated:

"An act harmless when done by one may become a public wrong when done by many acting in concert, for it then takes on the form of a conspiracy . . ." Eastern States Retail Lumber Dealers' Assn. v. U. S., 234 U.S. 600, 34 S.Ct. 951, 58 L.Ed. 1490 (1914).

There is generally no difficulty in determining whether the requisite plurality of persons is present in a given situation. However, in Section 1 cases involving closely affiliated corporations, the courts have had difficulty ascertaining who are separate parties capable of contracting or conspiring with each other. Such agreements are often termed "bathtub" conspiracies. E. Rockefeller, Antitrust Questions and Answers, p. 27.

It is generally accepted that a corporation and its unincorporated branches or divisions are not separate entities, capable of conspiring to commit a Section 1 violation. Poller v. CBS, 109 U.S.App.D.C. 170, 284 F.2d 599 (1960); Hawaiian Oke and Liquors, Ltd. v. Joseph E. Seagram and Sons, Inc., 416 F.2d 71 (9th Cir. 1969), cert. denied, 396 U.S. 1062, 90 S.Ct. 752, 24 L.Ed.2d 755 (1970). It is likewise generally accepted that a corporate office is not capable of conspiring with his corporation. Nelson Radio & Supply Co. v. Motorola, 200 F.2d 911 (5th Cir. 1952); Marion County Co-Op Assn. v. Carnation Co., 114 F.Supp. 58 (W.C.Ark.1953).

It has also been widely held that, under normal circumstances, a parent and its incorporated subsidiary cannot conspire in violation of Section 1 where they are not in actual competition in the market. See Ark Dental Supply Co. v. Civitron Corp., 461 F.2d 1093, 1094 n. 1 (3d Cir. 1972); United States v. Arkansas Fuel Oil Corp., 1960 Trade Case Para. 69,619 (N.D.Okl. 1960); Alpha Distributing Co. v. Jack Daniel's Distillery, 207 F.Supp. 136 (N.D.Cal., S.D.1961), aff'd, 304 F.2d 451 (9th Cir. 1962); Call Carl, Inc. v. BP Oil Corporation, 403 F.Supp. 568 (D.Md.1975). For example, Call Carl, Inc. v. BP Oil Corporation, supra, involved an action brought by independent service station operators against a gasoline marketer and its subsidiary, following cancellation of their franchises. The court concluded:

"Common sense dictates the conclusion that where conspirators are not competitors in the market in which the prices are

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