Acme Refrigeration of Baton Rouge, Inc. v. Whirlpool Corp.

• Decision Date: 28 March 1986
• Docket Number: No. 85-4043,85-4043
• Citation: 785 F.2d 1240
• Parties: 1986-1 Trade Cases 67,010, 1986-1 Trade Cases 67,158 ACME REFRIGERATION OF BATON ROUGE, INC., Plaintiff-Appellee, v. WHIRLPOOL CORPORATION & Heil-Quaker Corporation, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1240

785 F.2d 1240

1986-1 Trade Cases 67,010, 1986-1 Trade Cases 67,158

ACME REFRIGERATION OF BATON ROUGE, INC., Plaintiff-Appellee, v. WHIRLPOOL CORPORATION & Heil-Quaker Corporation Defendants-Appellants.

No. 85-4043.

United States Court of Appeals Fifth Circuit.

March 28, 1986.

Opinion on Denial of Rehearing and Rehearing En Banc April 28, 1986.

Michael R. Turoff, Arnstein, Gluck, Lehr, Barron & Milligan, John L. Ropiequet, Chicago, Ill., Onebane, Donohoe, Bernard, Torian, Diaz, McNamara & Abell, Timothy J. McNamara, Lafayette, La., for defendants-appellants.

Wallace A. Hunter, Durrett, Hardin, Hunter, Dameron & Fritchie, Baton Rouge, La., for plaintiff-appellee.

Appeal from the United States District Court for the Western District of Louisiana.

Before BROWN, REAVLEY and HILL, Circuit Judges.

REAVLEY, Circuit Judge:

Defendants Whirlpool Corporation and Heil-Quaker Corporation appeal the district court's judgment in favor of plaintiff Acme Refrigeration of Baton Rouge, Incorporated (Acme). We reverse.

FACTS

This litigation focuses on the sale of "Whirlpool" brand heating and air conditioning equipment in a thirteen-parish area located in southwest Louisiana (the "trade area"). The equipment is manufactured by Heil-Quaker, a Delaware corporation, at its plants in Tennessee. At the time of trial, Heil-Quaker marketed its products by contracting with 54 distributors.

Whirlpool, another Delaware corporation, is a major manufacturer of household appliances and other "white goods," and its thirteen sales divisions distribute these products nationwide. In addition, three of its sales divisions ¹ sold heating and air conditioning equipment, contracting with Heil-Quaker as their supplier. One of these three divisions, the Houston, Texas sales division ("HSD"), sold this equipment well outside the geographic region specified in its agreement with Heil-Quaker, that region being the Houston metropolitan area. Besides selling this equipment to buyers located in other Texas cities, HSD contracted with two Louisiana distributors who serviced the trade area, Cooling and Heating, Incorporated (located in Lafayette) and Cooling & Heating of Lake Charles, Incorporated (collectively, "C & H").

On January 1, 1981, Acme purchased the assets of C & H. On March 2, HSD executed a Dealer Sales Agreement (the "Agreement") with Acme, supplying it with Whirlpool brand equipment for the remainder of the year. Although no written contract was executed for 1982, the Agreement contained an automatic renewal clause, which provision was subsequently triggered by HSD's failure to give Acme timely notice of its decision not to renew their contract for 1982. ²

By the end of 1981, Heil-Quaker, disappointed with its share of the Houston market, decided that HSD should concentrate all its efforts on the Houston area. Unaware of any formal agreements HSD had executed, Heil-Quaker directed HSD to sever its "associate distributorships" by June 30, 1982. Contemporaneously, Heil-Quaker sought a distributor which could service all of the major Louisiana markets, including those outside the trade area. On April 21, 1982, Heil-Quaker appointed Solar Supply Company, Incorporated (Solar) to be its exclusive distributor in Louisiana. Solar's entry into the market immediately ended Acme's monopoly in the trade area. Moreover, Acme found itself at a competitive disadvantage because Solar--buying directly from Heil-Quaker instead of from HSD--was able to lower its cost of supply and pass the savings on to its customers.

Acme stopped buying equipment from HSD in July of 1982 and brought this suit in the district court. In its amended complaint, Acme charged, inter alia, ³ (1) that Heil-Quaker, as a wholly-owned subsidiary of Whirlpool, is the "alter ego" of Whirlpool, (2) that Heil-Quaker's sales are therefore imputable to Whirlpool, (3) that Whirlpool discriminated in price between Acme and Solar ⁴ in violation of Sec. 2 of the Clayton Act of 1914, as amended by the Robinson-Patman Act of 1936, 15 U.S.C. Sec. 13 (1982) (the "Act"), (4) that its Agreement with HSD was breached because it was forced to stop making purchases under that contract, and (5) that HSD had made several fraudulent misrepresentations. The jury returned a verdict in favor of Acme on all its claims and awarded $252,612 in damages. The trial court, entering judgment against defendants Whirlpool and Heil-Quaker on the antitrust claim, trebled damages to $757,837. ⁵ This appeal followed the trial court's denial of defendants' motions for a judgment n.o.v. and for a new trial.

DISCUSSION

A. Price Discrimination

In order to make a claim of price discrimination, a plaintiff must allege that a given commodity was sold to two different buyers at two different prices by the same seller. For years courts have wrestled with the problem of determining how affiliated corporations fit into this scheme. Whirlpool and its wholly-owned subsidiary, Heil-Quaker, are distinct legal entities. The district court, however, treated the two as one. Relying on Security Tire & Rubber Co. v. Gates Rubber Co., 598 F.2d 962 (5th Cir.1979), cert. denied, 444 U.S. 942, 100 S.Ct. 298, 62 L.Ed.2d 309 (1980), the trial judge held that, as a matter of law, a parent corporation and its wholly-owned subsidiary constitute a single economic unit, and he instructed the jury to consider Whirlpool and Heil-Quaker as the same seller. ⁶ We conclude that the trial judge misinterpreted Security Tire.

In Security Tire, a parent corporation and its wholly-owned subsidiary sold the same commodity, the subsidiary selling only what was first transferred to it by the parent. The plaintiff, who bought from the parent, charged that the subsidiary received a lower price. A panel of this circuit held that, as a matter of law, transfers from a parent corporation to its wholly-owned subsidiary cannot be considered "sales" to a "favored" buyer. 598 F.2d at 967. Because the plaintiff did not allege that the parent favored any other buyer, the court could find no price discrimination.

Although it attached no competitive significance to the price charged a subsidiary by its parent, the court emphasized that its holding was limited to situations where the subsidiary acted as buyer, not seller. Acknowledging that a subsidiary's own sales can form the basis for a claim of price discrimination, the court expressly left intact the "same seller" doctrine. Id. at 966. Under such a theory, a subsidiary's sales are imputed to its parent if the latter "actively controls" the former. Id. Therefore, if a parent and its "controlled" subsidiary charge different buyers different prices for the same commodity, they will have violated the Act. The same seller doctrine, however, is not to be invoked merely upon a showing that one seller is wholly owned by another. Instead, there must be an "affirmative showing" that the parent actively controls its subsidiary. Id. See III E. Kintner & J. Bauer, Federal Antitrust Law Sec. 21.16, at 212 (1983); 4 J. von Kalinowski, Antitrust Laws and Trade Regulation Sec. 24.04[a] (1985).

In the absence of evidence that Whirlpool either actively controlled Heil-Quaker or the terms of the latter's sales, we must conclude that they are not the same seller. See Hiram Walker, Inc. v. A & S Tropical, Inc., 407 F.2d 4, 8 (5th Cir.), cert. denied, 396 U.S. 901, 90 S.Ct. 212, 24 L.Ed.2d 177 (1969); Baim & Blank, Inc. v. Philco Corp., 148 F.Supp. 541, 543-44 (E.D.N.Y.1957). In its amended complaint, Acme acknowledged that Whirlpool and Heil-Quaker were separate corporations; nevertheless, it alleged that Heil-Quaker was the "alter ego" of Whirlpool. Whirlpool and Heil-Quaker moved for summary judgment, arguing that no factual dispute existed concerning their corporate relationship, that the undisputed facts demonstrated that Whirlpool did not actively control Heil-Quaker, and that they could not otherwise be considered the same seller. Attached to their motion were various affidavits, including those of HSD's general manager and Heil-Quaker's vice-president of marketing. These officials stated that Heil-Quaker's president and chief executive officer was neither an officer nor a director of Whirlpool; that all of Heil-Quaker's distributors operated under year-long contracts which were approved--then later either renewed or terminated at the close of the year--solely by Heil-Quaker, a decision reached without any participation by Whirlpool; that Heil-Quaker had previously not renewed distributorship contracts with other Whirlpool sales divisions because of poor performance; that Heil-Quaker's prices, terms and conditions of sale were determined and established solely by its personnel; and that HSD's prices, terms and conditions of sale were determined and established without consultation with Heil-Quaker.

The extent of Acme's evidence in opposition was an affidavit of its accountant, who stated that Whirlpool prepared and filed its financial reports on a consolidated basis. Acme failed to raise an issue of material fact concerning Whirlpool's alleged control of Heil-Quaker; furthermore, Acme has never pleaded actual control and does not now suggest that any other evidence exists in its favor bearing on the issue of control. We conclude that the uncontroverted facts establish that Whirlpool and Heil-Quaker are not the same seller. Moreover, Acme did not allege that Whirlpool and Heil-Quaker, considered separately, discriminated in price. Therefore, we hold that Acme failed to raise any issue of price discrimination. Defendants' motion for summary judgment should have been granted. Failing this, their motion for judgment n.o.v. should have been granted.

B. Acme's State Claims

Acme was forced to choose between holding firm on price, thereby losing sales to Solar, and slashing prices, thereby making its sales unprofitable. Moreover, shortly after its appointment in April of 1982, Solar began informing its customers...