A-Abart Elec. Supply, Inc. v. Emerson Elec. Co.

• Decision Date: 23 April 1992
• Docket Number: Nos. 90-3751,91-2221,A-ABART,s. 90-3751
• Citation: 956 F.2d 1399
• Parties: 1992-1 Trade Cases P 69,739, 22 Fed.R.Serv.3d 53 ELECTRIC SUPPLY, INCORPORATED, Plaintiff-Appellant, v. EMERSON ELECTRIC COMPANY and Littman Brothers Energy Supplies, Incorporated, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1399

956 F.2d 1399

1992-1 Trade Cases P 69,739, 22 Fed.R.Serv.3d 53

A-ABART ELECTRIC SUPPLY, INCORPORATED, Plaintiff-Appellant, v. EMERSON ELECTRIC COMPANY and Littman Brothers Energy Supplies, Incorporated, Defendants-Appellees.

Nos. 90-3751, 91-2221.

United States Court of Appeals Seventh Circuit.

Argued May 8, 1991.

Decided Feb. 27, 1992.

Rehearing Denied April 23, 1992.

Bernard M. Kaplan (argued), Norman S. Rosen, John W. Boyles, Ruben, Kaplan & Rosen, Skokie, Ill., for A-Abart Elec. Supply, Inc.

Laurence H. Levine, Robert L. Stout, Jr. (argued), Douglas A. Freedman, William J Andrew B. David (argued), William J. Gigler, Sugar, Friedberg & Felsenthal, Chicago, Ill., for Littman Bros. Energy Supplies, Inc.

Gibbons, James F. Stern, Latham & Watkins, Chicago, Ill., for Emerson Elec. Co.

Before WOOD, Jr., COFFEY and KANNE, Circuit Judges.

COFFEY, Circuit Judge.

A-Abart Electric Supply, Inc. ("A-Abart") filed a three-count complaint in the district court against Emerson Electric Company ("Emerson") and Littman Brothers Energy Supplies, Inc. ("Littman"). Count I alleged that both Emerson and Littman violated Section I of the Sherman Act, 15 U.S.C. § 1. Count II charged Emerson with breaching a contract to sell A-Abart 552 ceiling fans and related accessories. Count III charged Littman with tortious interference with A-Abart's contractual relations with Emerson and with A-Abart's prospective economic relationship with Emerson. All three parties moved for summary judgment. The district court entered summary judgment against A-Abart on all three counts. A-Abart appeals the summary judgment order. In a separate appeal arising from the same litigation, A-Abart contests the district court's imposition of a $2,500 fine on A-Abart's counsel pursuant to Fed.R.Civ.P. 11. We consolidated these two appeals and now affirm.

FACTUAL BACKGROUND

In 1988, Emerson, a Missouri corporation and manufacturer of electrical products, began to market a new line of ceiling fans across the country, including the Chicago, Illinois area. A-Abart and Littman were both in the retail ceiling fan business in the Chicago area.

On September 8, 1988, representatives of Emerson met with representatives of Littman to present Littman with a proposed marketing strategy for the new line of Emerson ceiling fans. During this meeting, the Littman representatives asked the Emerson representatives the names of other local distributors who would be carrying the new line. Emerson stated that it intended to call on every retail seller in Chicago and a decision would then be made to whom they would make their fans available for sale. Littman representatives advised their Emerson counterparts that if Emerson intended to make their line of ceiling fans available to Littman's primary competitor, A-Abart, Littman was not interested in carrying the new ceiling fan line. Littman stated that it made this business judgment concerning the broader market area because it did not want to commit its advertising and marketing resources to introduce and promote this new product if the market share would be insufficient to justify the expense.

On October 18, 1988, Emerson met with A-Abart in Chicago to present its marketing plan for the new ceiling fan. Price lists, brochures and purchase order forms were supplied to A-Abart. On November 18, 1988, A-Abart submitted to Emerson a purchase order for 552 ceiling fans on a form provided by Emerson. According to A-Abart's president, the order had been solicited by an Emerson Chicago area sales representative who gave A-Abart a verbal assurance that it would be accepted.

After the September 8th, 1988 meeting, there were no further discussions between Emerson and Littman until November 30, 1988, when Emerson informed Littman that it had decided to sell to Littman and not to A-Abart. A-Abart does not contend, and there is no record evidence demonstrating that Emerson and Littman agreed with any other retailer to exclude A-Abart from the selling of the new ceiling fan line.

The district court, after finding no material facts in dispute, entered summary judgment against A-Abart on all three counts. The court also sanctioned A-Abart's counsel pursuant to Fed.R.Civ.P. 11. We affirm.

I.

A summary judgment motion should be granted by the district court "only when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). In reviewing a grant of summary judgment, we must view the record and all inferences drawn therefrom in the light most favorable to the party opposing the motion." Beard v. Whitley County REMC, 840 F.2d 405, 409-10 (7th Cir.1988) (citations omitted).

II.

In Count I of its complaint, and again on appeal, A-Abart alleges that Emerson's refusal, at Littman's insistence, to sell its new ceiling fan line to A-Abart constituted a per se violation of Section I of the Sherman Act. The Act provides that "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is declared to be illegal." 15 U.S.C. § 1.

In Business Electronics Corp. v. Sharp Electronics Corporation, 485 U.S. 717, 108 S.Ct. 1515, 99 L.Ed.2d 808 (1988) the Supreme Court considered this same argument on a factual record strikingly similar to the one presented in this appeal. In Business Electronics, an electronic calculator retailer, Hartwell, informed its supplier, Sharp Electronics, that it would terminate its dealership unless the supplier ended its relationship with a rival retailer, Business Electronics. Sharp then terminated Business Electronics' dealership. Business Electronics brought suit alleging that Sharp and Hartwell had conspired to terminate Business Electronics' dealership and that such a conspiracy was illegal per se under § 1 of the Sherman Act.

The Supreme Court began its analysis in Business Electronics by noting that

"[o]rdinarily, whether particular concerted conduct violates § 1 of the Sherman Act is determined through case-by-case application of the so-called rule of reason--that is, 'the factfinder weighs all of the circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition.' Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49 [97 S.Ct. 2549, 2557, 53 L.Ed.2d 568] (1977).... We have said that per se rules are appropriate only for 'conduct that is manifestly anticompetitive,' id., at 50 , that is, conduct 'that would always or almost always tend to restrict competition and decrease output.' "

Business Electronics, 485 U.S. at 723, 108 S.Ct. at 1519 (citations omitted).

The Court further noted that

"[a]lthough vertical agreements on resale prices have been illegal per se since" 1911 "we have recognized that the scope of per se illegality should be narrow in the context of vertical restraints. In Continental T. V., Inc. v. GTE Sylvania Inc., ... we refused to extend per se illegality to vertical nonprice restraints, specifically to a manufacturer's termination of one dealer pursuant to an exclusive territory agreement with another.... We concluded that vertical nonprice restraints had not been shown to have such a 'pernicious effect on competition' and to be so 'lack[ing] [in] ... redeeming value' as to justify per se illegality.... Rather, we found, they had real potential to stimulate interbrand competition, 'the primary concern of antitrust law.' "

Business Electronics, 485 U.S. at 724, 108 S.Ct. at 1519 (emphasis added) (citations omitted).

Thus, as the district court stated, "the only two relevant questions are whether the restraint imposed by the alleged 'conspiracy' between Emerson and Littman is 'vertical' or 'horizontal' and, if vertical, whether the restraint involves prices or price levels." A-Abart argues that the alleged agreement between Emerson and Littman "though facially vertical" should be considered a horizontal restraint of trade. Appellant's brief at 27. Business Electronics makes clear that the kind of restraint alleged by A-Abart is vertical. "Restraints imposed by agreement between competitors have traditionally been denominated as horizontal restraints, and those imposed by agreement between firms at different levels of distribution as vertical restraints." Business Electronics, 485 U.S. at 730, 108 S.Ct. at 1523. "[A] restraint is horizontal not because it has horizontal effects, but because it is the product of a horizontal agreement." Business Electronics, 485 U.S. at 731 n. 4, 108 S.Ct. at 1523. Here, the alleged conspiracy was a vertical one because it was between two firms at different levels in the distribution spectrum: Emerson, a manufacturer, and Littman, a retailer. The alleged conspiracy was the product of a vertical agreement.

Business Electronics thus requires that A-Abart demonstrate that an agreement on price levels was part of the alleged Emerson-Littman conspiracy. A-Abart, however, does not argue that the agreement involved price or price levels. A vertical restraint of trade that does not involve price levels is not per se illegal under the Supreme Court's interpretation of § 1 of the Sherman Act.

A-Abart's only chance for a successful claim on these facts under § 1 of the Sherman Act is to demonstrate that under a "rule of reason [test] ... all of the circumstances of a case ... [demonstrate that] a restrictive practice should be prohibited as imposing an unreasonable restraint on competition." Business Electronics, 485 U.S. at 723, 108 S.Ct. at 1519. "Under that analysis the plaintiff must show that the challenged restraint has an adverse impact on competition in the relevant market." Bi-Rite Oil Company, Inc. v. Indiana Farm Bureau Cooperative Association, Inc., 908 F.2d 200, 203 (7th Cir.1990). A-Abart, in its brief, makes a one sentence mention of the rule-of-reason test, but only to assert...