Estey & Associates, Inc. v. McCulloch Corp.

• Decision Date: 14 March 1986
• Docket Number: Civ. No. 83-1416-RE.
• Parties: ESTEY & ASSOCIATES, INC., an Oregon corporation, dba Lucky JT Distributing Co., Plaintiff, v. McCULLOCH CORPORATION, a Maryland corporation, Black & Decker Corporation, a Maryland corporation fka The Black and Decker Manufacturing Company; Black & Decker (U.S.) Inc., a Maryland corporation; and Black & Decker, Inc., a Delaware corporation, Defendants.
• Court: U.S. District Court — District of Oregon

663 F. Supp. 167

ESTEY & ASSOCIATES, INC., an Oregon corporation, dba Lucky JT Distributing Co., Plaintiff, v. McCULLOCH CORPORATION, a Maryland corporation, Black & Decker Corporation, a Maryland corporation fka The Black and Decker Manufacturing Company; Black & Decker (U.S.) Inc., a Maryland corporation; and Black & Decker, Inc., a Delaware corporation, Defendants.

Civ. No. 83-1416-RE.

United States District Court, D. Oregon.

March 14, 1986.

COPYRIGHT MATERIAL OMITTED

R. Alan Wight, Peter C. Richter, James F. Dulcich, Miller, Nash, Wiener, Hager & Carlsen, Portland, Or., for plaintiff.

George L. Wagner, James E. Bartels, Spears, Lubersky, Campbell, Bledsoe, Anderson & Young, Portland, Or., for defendant McCulloch Corp.

Don H. Marmaduke, Scott G. Seidman, Tonkon, Torp, Galen, Marmaduke & Booth, Portland, Or., for defendants Black & Decker Corp., Black & Decker (U.S.), Inc., and Black & Decker, Inc.

OPINION

REDDEN, District Judge:

Plaintiff brings this suit against defendants McCulloch and Black & Decker on account of the termination of the distributorship relationship between McCulloch and plaintiff on September 1, 1983. A series of antitrust claims have been asserted to broaden the attack. McCulloch in turn has made a counterclaim against plaintiff. Defendants move for summary judgment on all the claims, and on the counterclaim. Summary judgment is granted in each case for defendants.

BACKGROUND

Plaintiff Estey & Associates, Inc., a distributor, does business as Lucky JT Distributing Co. Defendant McCulloch Corporation is a Maryland corporation (McCulloch Corp.). McCulloch Corp. should not be confused with what I refer to herein as the McCulloch business. McCulloch business is now part of McCulloch Corp., but prior to March 31, 1983, it was a division and then a subsidiary of defendant Black & Decker (U.S.), Inc. McCulloch business deals with products having the McCulloch trade name, including chain saws, chain saw accessories and log splitters. There are three Black & Decker defendants: Black & Decker Corporation, a Maryland corporation; Black & Decker (U.S.), Inc., a Maryland corporation; and Black & Decker, Inc., a Delaware corporation. I treat them collectively as Black & Decker.

The McCulloch business sometimes uses a two-step marketing system, selling to wholesale distributors who then sell to retailers. Sometimes it sells directly to retailers. Lucky and its predecessors have long served as wholesale distributors of McCulloch business products.

Friction developed between the McCulloch business and Lucky in the fall of 1981. Pacific Marine Schwabacher, Inc. (PMSI), another wholesale distributor for McCulloch, ceased doing business in November of 1981. Lucky assumed PMSI's distribution responsibilities hoping to sell to retailers in the region, especially Ernst Home Centers (Ernst), a large account. Lucky purchased the PMSI inventory and leased a warehouse for their storage.

McCulloch business began selling directly to Ernst. Prior to such direct sales, McCulloch business decided to compete for the Ernst account, but implied to Lucky that it would not do so.

Until late 1981, the relationship between McCulloch business and Lucky was based on a written agreement. The last agreement was signed on December 31, 1980, and expired in 1981. It permitted either party to terminate upon 30 days' notice, with or without cause. Negotiations for a subsequent written contract were unsuccessful. Lucky continued to act as a distributor.

On March 31, 1983, Black & Decker transferred McCulloch business to McCulloch Corp. McCulloch Corp. continued to deal with Lucky.

Lucky carried products of McCulloch business competitors, and in March 1983 became a distributor for Poulan/Weed Eater, a major competitor. On September 1, 1983, McCulloch Corp. notified Lucky that the distributor relationship was terminated as of November 1, 1983.

Estey filed this action, citing several claims: price discrimination under the Robinson-Patman Act, against both McCulloch Corp. and Black & Decker; attempted monopolization under the Sherman Act and under Oregon antitrust laws, against McCulloch Corp.; breach of contract, promissory estoppel and equitable recoupment against McCulloch Corp.; and bad faith termination of a contract, against McCulloch Corp. Other claims have been abandoned. McCulloch Corp. has counterclaimed for $182,360.29 for goods sold to Estey but not paid for.

DISCUSSION

A. Standard

A summary judgment should be granted if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed.R. Civ.P. 56(c). The moving party has the burden of establishing the absence of a genuine issue of material fact. Securities and Exchange Commission v. Murphy, 626 F.2d 633, 640 (9th Cir.1980). All reasonable doubts as to the existence of genuine issues must be resolved against the moving party. Hector v. Wiens, 533 F.2d 429, 432 (9th Cir.1976). The inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962). Where different ultimate inferences can be drawn, summary judgment is inappropriate. Sankovich v. Life Insurance Company of North America, 638 F.2d 136, 140 (9th Cir.1981).

Summary judgment should be used sparingly in complex antitrust litigation where motive and intent play leading roles, the proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot. Poller v. Columbia Broadcasting System, 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962). However, antitrust claims are not immune from summary judgment, and summary judgment should be granted when there is no genuine issue of material fact. Ron Tonkin Gran Turismo v. Fiat Distributors, 637 F.2d 1376, 1381 (9th Cir.1981).

B. Claims

1. Termination

The Seventh and Eighth Claims are a series of theories concerning the termination by McCulloch of plaintiff as a wholesale distributor. I begin with these claims because they are the true heart of this litigation. The four theories are: 1) breach of contract; 2) bad faith termination; 3) promissory estoppel; and 4) equitable recoupment.

The contract claim is invalid because any contract between McCulloch Corp. and plaintiff was terminable at will. Under Oregon law, a contract of indefinite duration is terminable at will. Andersen v. Waco Scaffold & Equip., 259 Or. 100, 105, 485 P.2d 1091 (1971). The motive of a person exercising a contractual right cannot render that exercise unlawful. Bliss v. Southern Pacific Co., et al., 212 Or. 634, 646-47, 321 P.2d 324 (1958).

McCulloch announced termination of the distributorship relationship five months after it began, effective in two months. It thereby exercised its contractual right to terminate and there is no breach of contract.

Plaintiff argues that the 1981 contract between Black & Decker and plaintiff is relevant and must be considered. That contract stated that California law would apply to all contractual disputes. Plaintiff argues that California law requires good cause for termination of such a contract. The argument plaintiff advances for McCulloch Corp.'s responsibility for the prior actions of another corporation is the "mere continuation" theory.

Generally, a corporation acquiring all or substantially all of the assets of another corporation does not thereby automatically assume liability for the debts of the vendor corporation. Peterson v. Harville, 445 F.Supp. 16, 24 (D.Or.1977). The corporate status of the buyer will be respected absent special circumstances, such as the corporation's operation without a certificate of incorporation, or fraud. Id. at 25-26. Another exception, never accepted or rejected by Oregon courts, occurs when the buyer is a mere continuation of the seller. Goldstein v. Gardner, 444 F.Supp. 581, 583 (N.D.Ill.1978). The theory of the exception is that if a corporation goes through a mere change of form without substantial change in substance, then it should not be allowed to thereby avoid liability. Thus, Groover v. West Coast Shipping Co., Inc., 479 F.Supp. 950, 951 (S.D.N.Y.1979):

In general, a corporation that purchases the assets of another corporation does not assume the liabilities of the selling corporation ...

However, plaintiff has sought to invoke the exception to this general rule of nonliability that a purchasing corporation will be held liable for the liabilities of a selling corporation if `the successor corporation is a mere continuation of the seller.' Ladjevardian v. Laidlaw-Coggeshall, Inc., 431 F.Supp. 834, 839 (S.D.N. Y.1977). In Ladjevardian, the court stated, `A continuation envisions a common identify of directors, stockholders and the existence of only one corporation at the completion of the transfer. Citation omitted. What it accomplishes is something in the nature of a corporate reorganization, rather than a mere sale.'

See also Goldstein, 444 F.Supp. at 584.

Even if the Oregon courts accept this theory, it would not apply here. Black & Decker not only continues in existence but it continues to be traded on the New York Stock Exchange. Black & Decker and McCulloch Corp. are not characterized by common officers, directors, or shareholders.

Because the exception is inapplicable here, the prior contract is irrelevant. The business relationship was terminable at will.

The claim for bad faith termination fails. Plaintiff cannot point to an Oregon case in which a bad faith termination of an at will contract supports liability. Indeed, to allow such a claim would emasculate the termination at will doctrine, and must be rejected.

The promissory estoppel theory also fails. It fails because it requires a promise; actual reliance on the promise; a substantial change in position by the promisee, and reasonable foreseeability by the promisor that his promise would...