Comcoa, Inc. v. NEC Telephones, Inc.

• Citation: 931 F.2d 655
• Decision Date: 26 April 1991
• Docket Number: 88-2333,Nos. 88-1957,s. 88-1957
• Parties: 1991-1 Trade Cases 69,416, 19 Fed.R.Serv.3d 1237 COMCOA, INC., a Kansas corporation; and Southwest Utilities, Inc., an Oklahoma corporation, Plaintiffs-Appellants, v. NEC TELEPHONES, INC., a New York corporation; and NEC America, Inc., a New York corporation, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 655

931 F.2d 655

1991-1 Trade Cases 69,416, 19 Fed.R.Serv.3d 1237

COMCOA, INC., a Kansas corporation; and Southwest

Utilities, Inc., an Oklahoma corporation, Plaintiffs-Appellants, v. NEC TELEPHONES, INC., a New York corporation; and NEC

America, Inc., a New York corporation, Defendants-Appellees.

Nos. 88-1957, 88-2333.

United States Court of Appeals, Tenth Circuit.

April 26, 1991.

Joseph V. Giffin, Ernest Summers III, of Chadwell & Kayser, Ltd., Chicago, Ill., and Richard F. Campbell III, of Fellers, Snider, Blankenship, Bailey & Tippens, Oklahoma City, Okl., for plaintiffs-appellants.

D. Kent Meyers and Robert E. Bachrach, of Crowe & Dunlevy, Oklahoma City, Okl., and James A. Murray, Jared E. Peterson, and Fran Smallson, of Graham & James, San Francisco, Cal., for defendants-appellees.

Before MOORE and EBEL, Circuit Judges, and SAM, District Judge. ^*

EBEL, Circuit Judge.

Plaintiffs, Comcoa, Inc. and Southwest Utilities, Inc., were distributors of business telephone systems manufactured by defendants NEC Telephones, Inc. and NEC America, Inc. Plaintiffs brought suit in the United States District Court for the Western District of Oklahoma against defendants alleging: (1) price discrimination in violation Sec. 2(a) of the Robinson-Patman Act; (2) intentional interference with plaintiffs' prospective economic relations; and (3) breach of an implied duty of good faith and fair dealing. ¹ The district court granted summary judgment in favor of the defendants on the issue of the implied duty of good faith and fair dealing. After a jury trial, the jury found in favor of the defendants on plaintiffs' remaining claims of price discrimination and intentional interference.

Plaintiffs appeal the summary judgment order on the issue of the implied duty of good faith and fair dealing, the denial of a directed verdict on defendants' changing conditions defense, and the jury's verdict on the issues of price discrimination and intentional interference. Plaintiffs also appeal the district court's imposition of sanctions against plaintiffs for failure to comply with a discovery deadline. We affirm in part, reverse in part, and remand for further proceedings.

BACKGROUND

The dispute between plaintiffs and defendants involves the sale and distribution of two types of business telephone systems On January 1, 1984, pursuant to the consent decree in United States v. AT & T Co., 552 F.Supp. 131, 226 (D.D.C.1982), aff'd, 460 U.S. 1001, 103 S.Ct. 1240, 75 L.Ed.2d 472 (1983), AT & T divested itself of its regional Bell operating companies ("RBOCs"). Prior to the AT & T breakup, RBOCs rented to their customers business telephone systems that were manufactured by an AT & T affiliate. After the AT & T breakup, RBOCs, which included Southwestern Bell, sold telecommunications equipment manufactured by companies other than AT & T or its affiliates.

                Key Telephone Systems (616 and 1648 Key systems) and PBX Telephone Systems (NEAX 12, 22, and 2400 PBX systems).  Defendants manufactured the telephone systems and sold them to authorized distributors who resold those systems to "end users."    Plaintiff Comcoa was a distributor of defendants' products from 1979 until it sold its telecommunications assets to Southwestern Bell Telecommunications, Inc., ("SWBT") in 1984.  SWBT is a subsidiary of Southwestern Bell Telephone Corporation ("Southwestern Bell").  Plaintiff Southwest Utilities became a distributor of defendants' products in 1981 and continues to distribute defendants' business telephone systems
                

During 1983, defendants sought an agreement from Southwestern Bell to purchase defendants' business telephone systems after the AT & T breakup. The negotiations resulted in a contract under which, after January 1, 1984, SWBT would purchase $22 million worth of defendants' Key systems over a two-year period. In return, defendants were to give SWBT a volume discount of 12%. The 1648 Key systems sold to SWBT after March 1984 had some updated features not found in the 1648 Key systems sold to plaintiffs.

Defendants sought a similar volume discount arrangement with Communications Corporation of America ("CCA"). Under the negotiated contract, effective December 1, 1983, CCA agreed to purchase $5 million in Key systems over one year; in return it received an 8% discount from defendants. ² In January 1983, and in 1984, defendants and CCA entered into similar volume discount arrangements for purchases of PBX telephone systems. A volume discount arrangement was also given to Universal Communications System ("UCS") for its purchases of the PBX telephone systems. The agreement with UCS was executed in May 1984 and the discounts were to be effective as of November 1983.

Although plaintiffs were unable to purchase at the volume that SWBT could, in late 1983 and early 1984 plaintiffs sought similar volume discounts for purchase commitments of $3 and $5 million over a two-year period. Defendants refused to give plaintiffs any volume discount at that time.

In June 1984, defendants announced that volume discounts would be made available to all of their qualified distributors and that the volume discounts would be applied retroactively. Comcoa was offered a volume discount retroactive to December 28, 1983, which corresponds to when Comcoa first requested a volume discount. Comcoa rejected the discounts because, by the time defendants offered the volume discounts to Comcoa, it had agreed to sell its telecommunication assets to SWBT. Southwest Utilities was offered a volume discount retroactive to March 10, 1984, which corresponds to when it had originally requested a discount. Southwest Utilities rejected the discounts because it did not believe that it was being offered a discount program equivalent to that being offered to SWBT.

Plaintiffs allege that as a direct result of the volume discounts in favor of large distributors, plaintiffs lost sales causing Comcoa to sell its telecommunications assets to SWBT and causing Southwest Utilities permanent business injury. Plaintiffs brought suit alleging price discrimination, intentional interference with prospective business, and breach of an implied covenant of good faith and fair dealing.

The district court granted summary judgment in favor of defendants on the issue of the implied covenant of good faith After the jury verdict, plaintiffs filed a motion for a new trial and renewed their motion for a directed verdict on the changing conditions defense. The district court denied the motions. Plaintiffs then filed this appeal.

                and fair dealing because plaintiffs had failed to tie the tort action to an express clause in the contract as is required under New York law. 3   After a jury trial on the other two claims, the jury found in favor of defendants.  In answer to special interrogatories, the jury found that defendants had failed to prove their meeting-competition defense but had proven their changing conditions defense to the Sec. 2(a) price discrimination claim.  The jury was divided on the issue of whether the telephone systems sold to SWBT were of "like grade and quality" as the systems sold to plaintiffs as is required by Sec. 2(a) of the Robinson-Patman Act
                

DISCUSSION

I. The Antitrust Defense of Changing Conditions

Section 2(a) of the Robinson-Patman Act prohibits discriminatory pricing of goods of like grade and quality which might substantially lessen competition or create a monopoly. ⁴ However, the act does allow price differences from time to time:

"in response to changing conditions affecting the market for or the marketability of the goods concerned, such as but not limited to actual or imminent deterioration of perishable goods, obsolescence of seasonal goods, distress sales under court process, or sales in good faith in discontinuance of business in the goods concerned."

15 U.S.C. Sec. 13(a) (emphasis added). In answer to a special interrogatory, the jury found that defendants had proven the changing conditions defense. Plaintiffs seek reversal of the jury verdict and argue: (1) that the district court's jury instruction on the changing conditions defense was erroneous; (2) that the district court erred in submitting the defense of changing conditions to the jury; and (3) that there is no evidence to support the jury's finding that the defense had been proven.

A. Jury instruction

Plaintiffs argue that the district court's jury instruction on the changing conditions defense did not correctly reflect the law in two respects: (1) it did not set forth the examples of changing conditions that are found in Sec. 2(a) of the Robinson-Patman Act (i.e., "actual or imminent deterioration of perishable goods, obsolescence of seasonal goods, distress sales under court process, or sales in good faith in discontinuance of business in the goods concerned"); and (2) the jury instruction, as interpreted by plaintiffs, states that generally declining prices constitute a changing condition. The jury instruction reads as follows:

"In addition, defendants have raised as a defense that their sales at reduced prices are permissible under the changing-conditions provision of the Robinson-Patman Act. Under this provision, sellers are permitted to make discriminatory changes in price in response to changing conditions affecting the market for or the marketability of the goods sold. Defendants claim that they sold at a lower price than to plaintiffs because of obsolescence of some goods and changes in the market itself which caused prices to decline.

If you find that defendants' lower-price sales were made for this reason, then you must find for defendants and against plaintiffs on plaintiffs' Robinson-Patman Act claim under Section 2(a). If you find that defendants' price reductions were not made for this reason, then you must find that defendant[s] [have] not established the changing conditions defense. Again defendants have the burden of proving this defense by a preponderance of the evidence."

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