909 F.2d 1524 (3rd Cir. 1990), 89-5729, J.F. Feeser, Inc. v. Serv-A-Portion, Inc.
|Citation:||909 F.2d 1524|
|Party Name:||J.F. FEESER, INC., and Juniata Foods, Inc., Appellants, v. SERV-A-PORTION, INC.; Hunt-Wesson Foods, Inc.; and Weis Markets, Inc.; Mark Crane, Mediator, Sky Brothers, Movants.|
|Case Date:||August 02, 1990|
|Court:||United States Courts of Appeals, Court of Appeals for the Third Circuit|
Argued Feb. 1, 1990.
Jeffrey L. Kessler (argued), Weil, Gotshal & Manges, New York City, William J. Flannery, Morgan, Lewis & Bockius, Harrisburg, Pa., for appellants.
Jeffrey Apfelbaum, Apfelbaum, Apfelbaum & Apfelbaum, Sunbury, Pa., Richard M. Jordan (argued), White & Williams, Philadelphia, Pa., for appellee Weis Markets, Inc.
Carleton O. Strouss, Kirkpatrick & Lockhart, Harrisburg, Pa., J. Edd Stepp, Jr. (argued), Peter Sullivan, David P. Restaino, Gibson, Dunn & Crutcher, Los Angeles, Cal., Norman P. Adler, San Francisco, Cal., for appellee Serv-A-Portion, DiGiorgio Corp.
Before STAPLETON and MANSMANN, Circuit Judges, and ACKERMAN, District Judge. [*]
MANSMANN, Circuit Judge.
In this antitrust matter involving the highly competitive food distribution business, we are asked to review a grant of summary judgment in favor of the defendants, a supplier and a wholesaler, and against the plaintiff wholesalers. The litigation primarily involves allegations of secondary line price discrimination in violation of sections 2(a) and 4 of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. Secs. 13(a), 15 (1936). Secondary line injury cases are characterized by price discrimination by a seller in sales to competing buyers.
Also at issue are whether the plaintiffs presented sufficient and relevant material facts to defeat the entry of summary judgment on a Sherman Act claim, i.e., did a conspiracy exist between the supplier and a competing wholesaler to discriminate in price to the detriment of the plaintiff-wholesalers, and whether one of the plaintiffs had the standing to bring this lawsuit. The plaintiffs allege that the district court usurped the function of the jury by improperly resolving disputed questions of fact and by evaluating the credibility of the testimony.
On review de novo, we conclude first, with respect to the Robinson-Patman Act claim, that the plaintiff has presented sufficient evidence supporting its position that, over a four year period of time, the defendant supplier discriminated against it in the prices charged for portion-controlled products. Genuine issues of material fact exist concerning whether the discrimination caused competitive injury (i.e., a reasonable possibility of harm to competition) which resulted in actual damage to the plaintiff. We will, therefore, vacate the district court's grant of summary judgment on this claim and remand for trial.
As to the Sherman Act claim, the present record does not reflect sufficient evidence of either the conspiracy or arrangement to exclude the plaintiff from the food distribution market to sustain a Sherman Act violation. We are aware, however, that the district court limited discovery to the issues of competitive impact and injury in the context of the Robinson-Patman claim. Since the plaintiffs alleged, in an affidavit filed pursuant to Fed.R.Civ.P. 56(f), that further discovery will uncover evidence of the conspiracy, we will vacate the dismissal of this count and remand for further discovery.
Finally, we find that the district court erred in deciding that Plaintiff Juniata Foods, Inc., does not have standing to proceed in the action. In conflict with other evidence, an affidavit indicates that Juniata was a wholesaler who directly purchased from Serv-A-Portion. Once again questions of material fact remain for the factfinder. Juniata, at this stage, will remain in the lawsuit.
The plaintiffs, J.F. Feeser, Inc., now known as Feesers, Inc., and Juniata Foods, Inc., commonly-owned corporations, are wholesale distributors of food products and related items to institutional purchasers (e.g., schools, nursing homes, hospitals, caterers and restaurants). Defendant Weis Markets, Inc., is engaged in the business of distributing food and related products to the same type of institutional customers to whom Feeser and Juniata distribute and is, therefore, in direct competition with them. Defendant Serv-A-Portion, Inc., is a manufacturer
and packager of food products which it sells to distributors. Serv-A-Portion is a leading supplier of portion-controlled food products, such as individual servings of ketchup, jelly, syrup and dressings. Serv-A-Portion has sold, and its successor, DiGiorgio Foods, 1 has continued to sell, a variety of portion-controlled products to Feeser, Weis Markets and other competitors, including Tartan Foods and Sky Brothers, in interstate commerce. The claims against Hunt-Wesson Foods, Inc., also a manufacturer and packager of the portion-controlled products, have been settled.
It is undisputed that food distribution is a highly competitive business. Since portion-controlled products are primarily "give away" items, 2 the end user (i.e., the final institutional purchaser) is sensitive to minute price differences between the competing wholesalers. In addition, these particular products are considered "bellwether" items which are customarily utilized as a gauge by the distributor's customers to evaluate a company's overall pricing. Accordingly, it is contended by Feeser and Juniata that its inability to offer competitive prices on Serv-A-Portion products not only impacted on its overall business goodwill but also caused the loss of other business.
The impact of these price differences prompted Feeser and Juniata 3 in 1985 to file a complaint contending that Serv-A-Portion discriminated against them in the prices it charged for its portion-controlled products and in favor of its competitors, Weis Markets, Tartan Foods and Sky Brothers. The alleged discrimination primarily involved the manner in which Serv-A-Portion conducted its pricing policies. According to Feeser, Serv-A-Portion had two general categories of pricing: truckload and bidding. It is Serv-A-Portion's bid pricing which Feeser contends operated in a discriminatory fashion. Products purchased through Serv-A-Portion's bidding process, available at lower prices, were offered to Serv-A-Portion's customers (the wholesalers) only on a case-by-case basis after submission of a formal and specific bid and on condition that they could be resold only to certain end users. It is not contested by Serv-A-Portion that its bidding requirements were not rigidly followed nor that Weis Markets used Serv-A-Portion's failure to enforce its procedures to Weis Markets' advantage by selling products purchased by bid to any of its customers.
It is also contended by Feeser that Serv-A-Portion utilized other pricing mechanisms to camouflage price discrimination, such as affording special allowances and permitting deductions. Feeser claims that although Tartan Foods and Sky Brothers derived benefits from Serv-A-Portion's deviation from established business practices, it was not granted similar advantages. As a direct result, Feeser alleges that it lost sales when its customers took advantage of the more favorable prices of Serv-A-Portion products offered by Feeser's competitors, Weis Markets, Tartan Foods and Sky Brothers. Feeser claims also that its revenues declined when it was forced to reduce its margins to attempt to meet the prices offered by the favored competitors. In addition to losing sales and incurring reduced profits, Feeser's inability to match Weis Markets' prices resulted in a loss of goodwill among its customers, so that
Feeser was not asked to service them on other products.
Feeser requested injunctive relief and treble damages for violations of sections 2(a) and 2(f) of the Robinson-Patman Act and section 1 of the Sherman Act. Feeser also averred that the activity engaged in by the defendants represented unfair competition which violates the common law of Pennsylvania.
In September of 1985, four months after the complaint was filed, Serv-A-Portion asked the district court to require Feeser to identify and document as a threshold matter all the details of Serv-A-Portion's price discrimination and to cut off all discovery requested by Feeser relating to Serv-A-Portion's sales to competitors other than Weis Markets. On April 29, 1986, the district court entered a discovery order permitting Feeser to review only certain records maintained by Hunt and Serv-A-Portion for a one-year period to be selected by Feeser; requiring that Feeser's expert provide all parties with a price comparison report, supported by documentation, of transactions between Hunt, Serv-A-Portion and Weis Markets; and mandating that Feeser's expert provide all parties with a pricing report comparing transactions between Hunt and Serv-A-Portion and their customers.
Discovery continued in this prescribed manner. Feeser's expert economist, Dr. Robert Larner, prepared a pricing analysis that, inter alia, compared Serv-A-Portion's sales of identical products: (a) to Feeser and Weis Markets for the period January 1982 through January 1986; and (b) to Feeser, Tartan Foods and Sky Brothers for the period January 1984 through December 1984--the year for which discovery of Serv-A-Portion's sales to those competitors was permitted.
Upon presentation of this evidence by Feeser, Serv-A-Portion contended that the report prepared by Dr. Larner did not show competitive injury and requested that discovery be focused upon the elements of competitive and actual injury. The district court then limited the next phase of discovery to competition and injury and enumerated the manner and extent of such discovery.
On June 9, 1988, Serv-A-Portion filed a motion...
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