Abcor Corp. v. AM Intern., Inc.

• Decision Date: 06 November 1990
• Docket Number: No. 89-2205,89-2205
• Citation: 916 F.2d 924
• Parties: 1990-2 Trade Cases 69,217 ABCOR CORPORATION; James G. Kibler, Sr., Plaintiffs-Appellants, v. AM INTERNATIONAL, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 924

916 F.2d 924

1990-2 Trade Cases 69,217

ABCOR CORPORATION; James G. Kibler, Sr., Plaintiffs-Appellants, v. AM INTERNATIONAL, INC., Defendant-Appellee.

No. 89-2205.

United States Court of Appeals, Fourth Circuit.

Argued May 8, 1990.

Decided Oct. 15, 1990.

As Amended Nov. 6, 1990.

Daniel S. Koch, Kurz, Koch & Doland, Washington, D.C., argued (James S. Kurz, Patrick W. Reilly, Kurz, Koch & Doland, Washington, D.C., on the brief), for plaintiffs-appellants.

Arthur Douglas Melamed, Wilmer, Cutler & Pickering, Washington, D.C., argued (Thomas S. Connell, Ana Maria Martinez, Wilmer, Cutler & Pickering, Washington, D.C., on the brief), for defendant-appellee.

Before PHILLIPS, Circuit Judge, SMITH, Senior Judge, United States Court of Appeals for the Federal Circuit, sitting by designation, and YOUNG, Senior District Judge for the District of Maryland, sitting by designation.

JOSEPH H. YOUNG, Senior District Judge:

Abcor Corporation (Abcor) and its owner, James Kibler, appeal the grant of summary judgment by the district court in favor of the defendant AM International, Inc. (AMI), in this antitrust action alleging an illegal scheme to drive Abcor out of business. Because we find no material issues of fact, we affirm the judgment of the district court.

I.

AMI manufactures and services Multigraphics printing equipment worldwide. Abcor provides maintenance and repair services for AMI machines in the Washington, D.C., area. Abcor's owner, James Kibler, was a service technician at AMI until 1973 when he left to start his own company servicing AMI machines. He took six AMI employees with him at the time and over the years has hired numerous AMI employees. While AMI is a much larger company overall, Abcor has become the dominant service company for AMI machines in the Washington area. Of the 3,000 such machines in the Washington area, 2,200 are serviced in-house by the owners. Of the remaining 800 machines, Abcor services about 400, AMI services 200, and other competitors service 200.

In January 1987, AMI began negotiations with Abcor to purchase the company. The parties apparently reached a preliminary agreement, but AMI terminated the negotiations. AMI decided that it would rather compete for a larger market share in Washington rather than purchase one through the acquisition of Abcor, and it is clear that AMI did in fact step up its efforts to gain a larger share of the market. The dispute in the case turns on whether those efforts were legal competition on the merits or illegal anticompetitive measures designed to drive Abcor out of business.

Plaintiffs allege that AMI took the following steps to destroy Abcor:

1. created a low-priced, deceptive service contract to target Abcor's customers;

2. improperly used a list of Abcor's customers and financial information allegedly obtained during the acquisition negotiations to solicit Abcor's customers and undercut Abcor's prices;

3. inhibited Abcor's purchase of AMI parts by terminating Abcor's over-the-counter access to parts in AMI's Washington area supply depot and terminated its acceptance of telephone orders from Abcor in the Chicago parts center (requiring written orders);

4. attempted to spread false information about Abcor to the effect that the company was going to go out of business; and

5. hired Abcor employees to hurt the company and steal customers.

Abcor and its sole owner, Kibler, filed suit in the Federal District Court for the Eastern District of Virginia alleging violation of Sec. 2 of the Sherman Act for monopolization and attempted monopolization in addition to state law violations based on defamation and tortious interference with business relations. After substantial discovery, the district court granted summary judgment in favor of the defendants. The district court found that a genuine issue of fact existed concerning the market definition and whether there was a dangerous probability of success in the attempt to monopolize. However, these issues were rendered immaterial by the holding of the court that the plaintiff had failed to produce evidence to support a finding of (1) an intent to monopolize, (2) anticompetitive activity, or (3) antitrust injury. The court dismissed the federal claims and then exercised its discretion to dismiss the pendant state law claims without prejudice. Abcor now appeals to this court, and we affirm.

II.

A plaintiff seeking to establish attempted monopolization under Sec. 2 of the Sherman Act must show three things: (i) the defendant formed a specific intent to monopolize the market, (ii) the defendant engaged in anticompetitive or predatory conduct designed to further that intent, and (iii) a dangerous probability of success. White Bag v. International Paper, 579 F.2d 1384, 1387 (4th Cir.1974). On a motion for summary judgment made by the defendant, the plaintiffs are entitled to have all reasonable inferences drawn in their favor. The plaintiffs must, however, produce evidence to support a finding on each essential element to their case. Rule 56(e), Fed.R.Civ.P.; Matsushita Electric Industry Co. v. Zenith Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986). We review the decision of the district court to grant summary judgment de novo.

1. Specific Intent to Monopolize

The Supreme Court has held that attempted monopolization requires "a specific intent to destroy competition or build monopoly." Times-Picayune Pub. Co. v. United States, 345 U.S. 594, 626, 73 S.Ct. 872, 890, 97 L.Ed. 1277 (1953). A desire to increase market share or even to drive a competitor out of business through vigorous competition on the merits is not sufficient. United States Steel Corp. v. Fortner Enterprises, 429 U.S. 610, 612 n. 1, 97 S.Ct. 861, 863 n. 1, 51 L.Ed.2d 80 (1977) ("No inference of intent to monopolize can be drawn from the fact that a firm with a small market share has engaged in nonpredatory competitive conduct in the hope of increasing sales."). The plaintiff must show that the defendant sought to create a monopoly by circumventing the competitive process. The requisite intent may be shown through direct evidence or through inference by showing anticompetitive practices. See, e.g., Conoco Inc. v. Inman Oil Co., 774 F.2d 895, 905 (8th Cir.1985).

The district court found that the "sporadic activity on the part of AMI is insufficient to show ... specific intent ... to destroy Abcor's ability to compete in the alleged market...." ¹ Abcor argues that the court ignored both direct and circumstantial evidence that AMI sought to destroy Abcor through anticompetitive tactics.

Abcor's strongest direct evidence of intent derives from deposition testimony by Kibler. Kibler testified that an AMI manager called him shortly after AMI decided not to buy Abcor and said that AMI had decided that it did not need to buy Abcor because it could acquire its business through competition. An AMI salesman provided some corroboration by testifying that "top management" at AMI felt that it "could eventually get the business a little at a time, and therefore it wasn't worth it, buying it outright."

Plaintiffs argue that in the context of a motion for summary judgment the court must accept Kibler's inference that these statements imply a plan to destroy Abcor through illegal, anticompetitive actions. Plaintiffs seek to bolster this inference by arguing that since AMI had not been successful competing with Abcor in the past (resulting in its low market share), its renewed effort must have involved more than just straightforward competition on the merits.

The argument fails, however, because the statements quoted above do not show any evidence of illegal intent. By themselves, the statements show only that AMI planned to increase its competitive activity in the Washington area. While plaintiffs attempt to rely on Kibler's testimony that he interpreted AMI's statements and actions as indicative of illegal anticompetitive intent, he had no basis from which to make such an inference. In essence, he seeks to create a material factual dispute by asserting that he believes AMI had an anticompetitive plan. These bald assertions are not enough to survive summary judgment. "When a motion for summary judgment is made and supported as provided in [Rule 56], an adverse party may not rest upon the mere allegations or denials of the adverse party's pleadings, but ... must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e).

Even if the record does not contain sufficient direct evidence to support a finding that AMI possessed the specific intent to monopolize the relevant market through anticompetitive means, plaintiffs assert that the trier of fact may also infer specific intent from a series of anticompetitive acts. Plaintiffs argue that AMI engaged in at least five separate illegal, anticompetitive acts. However, as discussed more fully herein, none of the actions relied upon by plaintiffs rise to the level of illegal competition. Even viewing the acts as a whole, the record reveals no more than vigorous competition which did not rise to the level of an antitrust violation.

2. Anticompetitive Activity

To prove a violation of Sec. 2 of the Sherman Act, plaintiffs must also show that the defendant engaged in anticompetitive or predatory conduct designed to further an intent to monopolize. Here plaintiffs allege that AMI engaged in a series of anticompetitive activities designed to destroy Abcor. We address each in turn.

a. Discriminatory and Deceptive Pricing

In the past, Abcor has been able to offer its maintenance and repair services at prices about 20% less than those offered by AMI. Plaintiffs contend that AMI responded by instituting price reductions that, although they did not rise to the level of predatory pricing, were nonetheless deceptive. AMI allegedly offered its standard service contract, the Preventive Maintenance Agreement (PMA), to at least one Abcor customer...