Bacchus Industries, Inc. v. Arvin Industries, Inc.

Decision Date19 June 1991
Docket NumberNo. 89-2288,89-2288
Citation939 F.2d 887
Parties1991-1 Trade Cases 69,466, RICO Bus.Disp.Guide 7782 BACCHUS INDUSTRIES, INC., Appellant, v. ARVIN INDUSTRIES, INC., Appellee.
CourtU.S. Court of Appeals — Tenth Circuit

Sam Snoddy, El Paso, Tex., for appellant Bacchus Industries, Inc.

Daniel J. McAuliffe (James R. Condo, Nancy A. Stratta and Eileen J. Moore, with him on the brief), for appellee Arvin Industries, Inc.

Before MOORE and BALDOCK, Circuit Judges, and ANDERSON, * District Judge.

ALDON J. ANDERSON, Senior District Judge.

Bacchus Industries, Inc., ("Bacchus") appeals the judgment of the district court in its action against Arvin Industries, Inc. ("Arvin"). Bacchus appeals from two separate decisions of the district court. Initially, it is claimed that the district court improperly granted summary judgment in favor of Arvin on Bacchus' claims under 18 U.S.C. Secs. 1961-68 ("RICO") and on several pendent common law claims. Bacchus also claims that the district court erred in granting Arvin's motion for a directed verdict on two claims under 15 U.S.C. Secs. 1 & 2 ("Sherman Antitrust Act").

I. Facts

Bacchus and Arvin are competing manufacturers of evaporative coolers. Arvin entered the market in 1982 when it purchased the International Metals Products Division of McGraw-Edison, and created the ArvinAir division in order to manufacture evaporative coolers. R.Doc. 91, p. 5, p 4. Bacchus is a small company which was organized and is currently managed by members of the Bacchus family. Tr.Vol. 2, pp. 303-307. One major difference between the coolers manufactured by Arvin and the coolers manufactured by Bacchus is in the construction of the cabinets. Arvin's coolers have traditional square cabinets constructed of metal while the Bacchus cooler cabinet is round and constructed of fiberglass. Both coolers use an aspen pad as the cooling medium.

During 1983 and 1984, the Bacchus cooler received a certain amount of negative publicity. Bacchus claims that Arvin engaged in prohibited conduct in order to depict the Bacchus cooler as a fire hazard. Bacchus asserts that Arvin destroyed the product reputation of the Bacchus cooler in order to eliminate Bacchus as a competitor. Bacchus makes broad, general allegations but appears to base its claims on the following incidents.

On June 3, 1983, Bacchus suffered a major fire at its New Mexico plant. On June 7, 1983, Mr. Richard D. Fife, Arvin's vice president of marketing, sent a memo to Arvin's western area sales representatives informing them of the fire. Attached to the memo was a newspaper article describing the firefighters' difficulty in controlling the blaze and noting that "the fire spread fast because fiberglass is very flammable." Fife's memo transmitting the article stated: "The article identifies one of the major problems with fiberglass and/or plastic coolers. They are very flammable and emit toxic fumes which are deadly." R.Doc. 103, exb. 17.

In August, 1983, Arvin conducted a controlled burn test of evaporative coolers at Arvin's Phoenix plant ("the Phoenix Burn Test"). Evaporative coolers manufactured by Arvin, Bacchus, and a third manufacturer, Tradewinds, were ignited and then observed as they burned. The Bacchus cooler was constructed of fiberglass, the Tradewinds cooler of plastic, and the Arvin cooler of metal. Each of the three coolers used the same aspen cooling medium. A videotape of the Phoenix Burn Test shows that the Bacchus cooler burned more rapidly and more spectacularly than the Arvin cooler. Tr.Vol. 3, p. 499. Videotapes and still photographs of the Phoenix Burn Test were distributed to Arvin sales representatives and used on a limited basis as a sales tool. Tr.Vol. 1, p. 163.

On April 25, 1984, Fife sent another memo to Arvin's western area sales representatives advising them of a newspaper article from the El Paso Times entitled "Housing's coolers called fire hazards." The article reported that the Bacchus cooler could pose a fire hazard and detailed the results of the El Paso Housing Authority Board's own burn test of a Bacchus cooler and a Tradewinds cooler. The article noted "the toxicity of fumes from the blaze and the speed of the fire on the Bacchus model." R.Doc. 103, exb. 18.

On May 3, 1984, Wayne Coggins, the Odessa, Texas Fire Marshall, conducted an independent burn test of evaporative coolers manufactured by Arvin, Bacchus and Tradewinds ("the Odessa Burn Test"). Coggins conducted the test to determine whether fiberglass and plastic coolers would create a fire hazard if they were involved in a fire or whether they were any danger to roofs once they caught on fire. R.Doc. 91, pp 23-24. An Arvin distributor supplied the evaporative coolers to Mr. Coggins who directed his firemen to remove the coolers from the packing cartons and to set the coolers up on concrete blocks. Tr.Vol. 2, p. 261. Each cooler was ignited in the same manner and then observed as it burned. The videotape of the test shows that while all three coolers were inflammable, the non-metallic coolers manufactured by Bacchus and Tradewinds burned more rapidly and more spectacularly than the metallic cooler manufactured by Arvin. The Odessa Burn Test was videotaped by three local television stations. Tr.Vol. 2, p. 281.

By letter dated May 10, 1984, Bacchus asked Arvin for permission to review the Phoenix Burn tape "to check its accuracy." R.Doc. 103, exb. 13. Arvin's in-house counsel responded by letter dated June 12, 1984 as follows:

Please be advised that, in the regular course of its business, ArvinAir conducts tests of its products and those of its competitors, and in one instance, a test of inflammability was videotaped. In addition, we are advised that certain members of the electronic media have also videotaped such demonstrations.

Although I am assured that precautions were taken not to distort the characteristics of our competitors' products as well as our own, in order to avoid any further misunderstanding in this regard, we have requested that any copies of our tape which may exist outside of the ArvinAir organization be returned to us. Henceforth, these test depictions will be used by my client solely for purposes of its own internal examination.

You will please understand that this retrieval does not, and cannot, extend to recordings of similar tests which may have been conducted by those outside of the employ of Arvin Industries, over whom my client has no control.

R.Doc. 103, exb. 14.

By memo dated June 11, 1984, Fife again contacted Arvin's western area sales representatives and informed them that Arvin had agreed to discontinue showing the Phoenix Burn Tape. Fife asked the representatives to discreetly recover any tapes from distributors without discussing the reason for the return. R.Doc. 103, exb. 19; Tr.Vol. 1, pp. 163-166.

II. Procedural History

Bacchus sued Arvin alleging violations of 18 U.S.C. Secs. 1961-68 (RICO); 15 U.S.C. Sec. 1 and Sec. 2 (Sherman Antitrust Act); 15 U.S.C. Sec. 13 (Clayton Antitrust Act); 15 U.S.C. Sec. 1125 (Lanham Act) and state law claims for conspiracy to defraud and commercial disparagement. R.Doc. 57.

The trial court granted summary judgment in favor of Arvin on all of Bacchus' claims except the Sec. 2 Sherman Antitrust Act claim which was allowed to proceed to trial. R.Doc. 170. At trial, Bacchus claimed that Arvin violated Sec. 2 of the Sherman Antitrust Act by attempting to monopolize and/or conspiring to monopolize the residential evaporative cooler market. At the conclusion of the case presented by Bacchus, Arvin moved for and was granted a directed verdict. Tr.Vol. 5, p. 856. Bacchus appeals both the grant by the district court of Arvin's motion for summary judgment and the grant of Arvin's motion for a directed verdict.

III. Analysis
A. Summary Judgment

Because summary judgment involves purely legal determinations, we review the district court's decision to grant summary judgment de novo. Carey v. United States Postal Service, 812 F.2d 621, 623 (10th Cir.1987); Morgan v. Mobil Oil Corp., 726 F.2d 1474, 1477 (10th Cir.1984).

Summary judgment is appropriate when the record shows "that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party has the initial burden to show "that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986). Once the moving party has met its burden, the burden shifts to the nonmoving party to show that there is a genuine issue of material fact. The party opposing the motion must present sufficient evidence in specific, factual form for a jury to return a verdict in that party's favor. Clifton v. Craig, 924 F.2d 182, 183 (10th Cir.1991). The nonmoving party "may not rest upon the mere allegations or denials of his pleadings" to avoid summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).

1. The RICO Claims

Bacchus claims that the district court erred in granting summary judgment in favor of Arvin on two separate RICO claims. In Count IV of its amended complaint, Bacchus alleges that Arvin participated in the conduct of an enterprise through a pattern of racketeering activity in violation of 18 U.S.C. Sec. 1962(c). Count V of the amended complaint maintains that Arvin conspired with its agents, employees, manufacturer's representatives and distributors to conduct an illegal racketeering enterprise through a pattern of racketeering activities in violation of 18 U.S.C. Sec. 1962(d). R. Doc. 57, pp. 7-9.

To state a cause of action under Sec. 1962(c), a plaintiff must allege (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. Sedima, S.P.R.L. v. Imrex Co. Inc., 473 U.S. 479, 496, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985). Any person...

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