Aunyx Corp. v. Canon U.S.A., Inc.

• Decision Date: 09 January 1992
• Docket Number: No. 91-1758,91-1758
• Citation: 978 F.2d 3
• Parties: , 1992-2 Trade Cases P 70,005 AUNYX CORPORATION, et al., Plaintiffs, Appellants, v. CANON U.S.A., INCORPORATED, Defendant, Appellee. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 3

978 F.2d 3

14 ITRD 2513, 1992-2 Trade Cases P 70,005

AUNYX CORPORATION, et al., Plaintiffs, Appellants, v. CANON U.S.A., INCORPORATED, Defendant, Appellee.

No. 91-1758.

United States Court of Appeals, First Circuit.

Heard Jan. 9, 1992.

Decided Oct. 21, 1992.

Blair L. Perry, Boston, Mass., for plaintiffs, appellants.

Richard L. Bond with whom Norman Moloshok, Richard H. Silberberg, Robert G. Manson, Dorsey & Whitney, New York City, John J. Curtin, Jr., William N. Berkowitz and Bingham, Dana & Gould, Boston, Mass., were on brief, for defendant, appellee.

Before CYR, Circuit Judge, CAMPBELL and BOWNES, Senior Circuit Judges.

LEVIN H. CAMPBELL, Senior Circuit Judge.

The United States District Court for the District of Massachusetts entered a final judgment in favor of appellee Canon U.S.A., Inc., in a civil antitrust action brought by appellants Aunyx Corporation and Aunyx Business Machines Corporation. Appellants appeal from the judgment as to two of their claims. Because previous proceedings before the International Trade Commission were res judicata in respect to the antitrust claim and because no triable issues remained as to the breach of contract claim, we affirm.

I. BACKGROUND

A. Facts

Aunyx Corporation ("Aunyx Corp.") and Aunyx Business Machines Corporation ("ABM") (collectively "Aunyx") are Massachusetts corporations located in Hingham, Massachusetts. Robert J. Langone ("Langone") is the president and sole shareholder of both corporations. Appellee Canon U.S.A., Inc., ("Canon") is a New York corporation and a wholly-owned subsidiary of Canon, Inc., a Japanese corporation. Only Canon U.S.A. is a party to this appeal.

Among other products, Canon markets a line of photocopy machines known as "New Process" ("NP copiers"). These NP copiers employ a dry black powder made from resins and other coloring agents called "NP Toner" to print copies of documents onto paper. NP Toner is manufactured by Canon. All NP copiers need toner to make copies and for all practical purposes NP copiers can only use NP Toner. While other companies have attempted to make toner suitable for use in NP copiers, they have not successfully marketed any significant amount.

NP Toner is marketed in the United States by Canon through a nationwide network of approximately 500 independent, authorized dealers that sell copiers and toner, and are responsible for repairing and servicing the former. ¹ Three of the dealers were owned by Canon, while the others were independent.

In 1977, Canon organized the Copier Dealer Advisory Council ("DAC"). This council consisted of several varying sized and geographically diverse dealers that periodically met with Canon representatives to discuss matters of mutual interest.

Before 1979, Canon used a form of dealership agreement known as a "Manufacturer/Dealer agreement" pursuant to which Canon appoints dealers as non-exclusive dealers of various Canon products. This Manufacturer/Dealer agreement was subject to cancellation upon ninety days notice and did not make any provision relating to the sale of NP Toner or restricting dealers to selling into specific territories. ABM had signed such an agreement with Canon in 1979 ("the 1979 Agreement").

In 1983, Canon introduced a new form of dealership agreement ("the 1983 Agreement") which assigned dealers of NP copiers and NP Toner to specific territories and provided that each dealer could not market products outside its assigned territory. The alleged purpose of the 1983 Agreement was to prevent a practice known as "skating" which basically involved selling products outside the dealer's primary marketing area. Canon sent Aunyx a copy of the 1983 Agreement for its signature but Aunyx did not sign it.

In the summer of 1985, Aunyx embarked upon a program of selling large amounts of NP Toner, purchased from Canon, to end users throughout the United States. On October 15, 1985, the Vice-President of Canon Copier Division sent a letter to the President of Aunyx, Mr. Langone, advising him that Canon was aware that Aunyx had been purchasing NP Toner from Canon in quantities far in excess of what would be required to maintain the NP copiers it had purchased, and that Aunyx had been selling Canon NP Toner "outside its primary sales area and on a national basis, in violation of Canon's well-known established policy." The letter informed Aunyx that as of October 16, 1985, Canon would limit the amount of NP Toner that Aunyx could buy to no more than 250 cases per month.

B. Proceedings Below

On July 15, 1986, Aunyx filed its original complaint in the United States District Court for the District of Massachusetts charging Canon with a myriad of violations. See infra note 2. An amended complaint was filed on June 12, 1987. The original plaintiff was Aunyx Corp., and the original defendants were Canon, Inc., and Canon U.S.A. ABM was added as a plaintiff on the motion of Aunyx Corp. filed on June 12, 1987, and allowed on December 17, 1987.

A further ten-count ² amended complaint was filed on April 14, 1988 ("the Second Amended Complaint"). The Second Amended Complaint dropped Canon, Inc., as a party defendant, leaving as defendant only Canon U.S.A.

On the same day it filed its original complaint, July 15, 1986, Aunyx commenced proceedings before the International Trade Commission ("ITC") in Washington, D.C., against Canon U.S.A. and Canon, Inc., under section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337. ³ The district court action was put "on hold" awaiting the decision of the ITC.

In the ITC proceedings, Aunyx engaged in extensive discovery which included substantial document production, more than a hundred written interrogatories, and the oral depositions of 33 individuals over a period of 70 days. The entire prehearing discovery lasted almost one year.

Roughly eight months after its original filing before the ITC, on March 17, 1987, Aunyx moved to amend its ITC Complaint to add a claim that Canon and its retail dealers had entered into a horizontal conspiracy to divide the United States market for NP toner among the dealers in violation of section 1 of the Sherman Act, 15 U.S.C. § 1. In an order entered April 15, 1987, an Administrative Law Judge ("ALJ") denied Aunyx's motion on the ground of untimeliness. The ALJ concluded that the requested amendment "would impose an impossible burden upon the parties to complete their discovery and prepare for hearing." Aunyx never sought review of the denial of its motion to amend.

The ITC's proceedings terminated in an order adverse to Aunyx. Aunyx at first sought review of the ITC's decision in the United States Court of Appeals for the Federal Circuit, but thereafter moved to dismiss its petition for review. Aunyx's motion to dismiss its petition for review of the ITC proceedings was allowed, and the petition was dismissed on August 2, 1988.

Upon completion of the proceedings before the ITC and the dismissal of its review petition before the Federal Circuit, Aunyx reactivated its lawsuit in the district court. On November 22, 1988, Canon filed a motion for summary judgment. Accompanied by exhibits relating to the ITC proceedings, this motion urged that the ITC proceedings had res judicata effect upon the district court proceedings. On June 6, 1989, District Judge McNaught issued a Memorandum and Order ruling upon the motion for summary judgment. Judge McNaught concluded that Counts 1, 2, 5, 6, 7 and 9 of the Second Amended Complaint had been fully litigated in the ITC case and thus were barred from further consideration by the doctrine of res judicata. As for counts 3 and 4, which asserted claims under state law, Judge McNaught concluded that they were also barred from further consideration by the doctrine of collateral estoppel or issue preclusion. He found, however, that the ALJ's denial of Aunyx's motion to add its related horizontal conspiracy theory set forth in Count 8, and the ALJ's failure to consider the breach of contract claim presented in Count 10, had deprived Aunyx of the opportunity to fully litigate those claims before the ITC. As a result, he refused to grant summary judgment as to these two counts. The district court entered final judgment on Counts 1 through 7 and Count 9 on August 17, 1989. No appeal to this court has been taken from that judgment.

On June 8, 1990, Canon filed a motion for summary judgment seeking dismissal of all of Count 8 and of Count 10 to the extent it alleged a breach of contract arising from Canon's restrictions on Aunyx's toner purchases. On September 11, 1990, Judge McNaught refused to dismiss Count 8 but allowed the motion for summary judgment in respect to part of Count 10. Due to the anticipated retirement of Judge McNaught, the case was reassigned to Judge Rya W. Zobel on December 5, 1990.

A jury trial on Count 8 began on March 11, 1991, and continued for six days. On March 19, 1991, Judge Zobel directed a verdict in favor of Canon on Count 8 (horizontal conspiracy), concluding that Aunyx did not present evidence from which a jury could infer antitrust injury. Trial on what remained of Count 10 was scheduled to commence on June 10, 1991. On June 4, 1991, the district court ordered the plaintiffs to notify the defendant and the court of their contentions as to the issues remaining to be tried. The plaintiffs did so the following day.

On June 11, 1991, the district court published a "Further Order Concerning Count " stating that nothing remained to be tried and ordering that judgment be entered for Canon on Count 10. Final judgment was entered by the district court on Counts 8 and 10 on June 27, 1991. This appeal followed.

II. DISCUSSION

A. Count 8: Res Judicata

Although the district court did not consider the issue of whether the ITC proceedings had res judicata effect on Count 8 when it granted a directed verdict in Canon's favor, we do so now, mindful that "we need not limit ourselves to the exact grounds for decision utilized below. We are free,...