Black Gold, Ltd. v. Rockwool Industries, Inc., s. 80-2098

• Decision Date: 09 March 1984
• Docket Number: 80-2143,Nos. 80-2098,82-1176 and 82-1177,s. 80-2098
• Citation: 729 F.2d 676
• Parties: 1984-1 Trade Cases 65,893 BLACK GOLD, LTD., a Colorado corporation, Plaintiff-Appellee and Cross- Appellant, v. ROCKWOOL INDUSTRIES, INC., a Delaware corporation, Defendant-Appellant and Cross-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 676

729 F.2d 676

1984-1 Trade Cases 65,893

BLACK GOLD, LTD., a Colorado corporation, Plaintiff-Appellee and Cross- Appellant, v. ROCKWOOL INDUSTRIES, INC., a Delaware corporation,

Defendant-Appellant and Cross-Appellee.

Nos. 80-2098, 80-2143, 82-1176 and 82-1177.

United States Court of Appeals,

Tenth Circuit.

March 9, 1984.

Kenneth R. Bennington of Brownstein Hyatt Farber & Madden, Denver, Colo. (John W. Madden III, Thomas D. Smart, Jr. of Smart, DeFurio & Brooks & Eklund, Denver, Colo., with him on brief), for Black Gold, Ltd.

John G. Wigmore of Lawler, Felix & Hall, Los Angeles, Cal. (Richard C. Neal, Los Angeles, Cal., Jeffrey L. Smith and John P. Congdon of Cohen, Brame, Smith & Krendl, Denver, Colo., with him on brief), for Rockwool Industries, Inc.

Before DOYLE, McKAY and SEYMOUR, Circuit Judges.

SEYMOUR, Circuit Judge.

Black Gold, Ltd. (Black Gold) brought this private antitrust action against Rockwool Industries, Inc. (Rockwool) for damages resulting from alleged violations of section 1 of the Sherman Act, 15 U.S.C. Sec. 1 (1982), section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. Sec. 13(a), and section 3 of the Clayton Act, 15 U.S.C. Sec. 14. After all the evidence had been presented to a jury, the district court directed a verdict for Rockwool on claims alleging an illegal tying arrangement and a refusal to deal, and sent the remaining two claims based on price discrimination to the jury. The jury returned a general verdict in favor of Black Gold. Both parties have appealed. We affirm in part, reverse in part, and remand for a new trial.

I. BACKGROUND

The stipulated facts giving rise to this controversy are as follows. Black Gold is in the business of installing insulation in both new construction and existing structures. Rockwool manufactures, sells, and distributes an insulating material generically known as rockwool for use in both new and existing buildings. Williams Insulation Company (Williams), a competitor of Black Gold, also installs insulation in new and existing buildings.

Both Black Gold and Williams bought insulating material from Rockwool during the relevant time. This material comes in two forms, blown wool and batts. Blown Between September 1975 and February 1979, Public Service Company of Colorado (PSC), a public utility supplying gas and electricity to Colorado consumers, operated a program to provide its residential customers an opportunity to upgrade their home insulation. Under the program, customers could choose to have either rockwool, fiberglass, or cellulose insulation retrofitted into their homes.

wool is loose and is blown into the attics of existing buildings. Batts are thick strips or pads wrapped in paper or foil and are used in new construction.

PSC maintained lists of installers approved to apply each type of insulation, and offered retrofitting jobs in the Denver metropolitan area to installers on a rotating basis. Installers could only use types and brands of insulation specifically approved by PSC, and could not substitute another type of insulation for that specified by the homeowner. Prices for the jobs were set by PSC. Although the price varied according to the type of insulation installed, all installers of the same type of material were paid at the same rate.

The only brand of rockwool insulating material approved for use in the PSC program was that manufactured by Rockwool. Both Black Gold and Williams were qualified to install rockwool in the PSC program and both bought blown wool from Rockwool to use in the program. Rockwool stipulated that during the PSC program it regularly sold both blown wool and batts to Williams at a lower price than it offered to Black Gold.

At trial, Black Gold offered evidence tending to support the following allegations. Rockwool was unable to sell as great a quantity of batts insulation as it wished because of a slump in new construction that occurred during the time the PSC program was in effect. Because the PSC program involved the insulation of older homes rather than new construction, batts were not used in the program. By contrast, Rockwool's blown wool was selling rapidly due to the demand created by the PSC program. Black Gold alleges that Rockwool attempted to coerce Black Gold to purchase batts by withholding timely delivery of blown wool which Black Gold needed to participate in the PSC program. Except for a small test shipment, however, Black Gold refused to buy rockwool batts from Rockwool, allegedly because Black Gold believed fiberglass batts were a superior product and because Rockwool would not sell its batts to Black Gold at as low a price as it sold them to Black Gold's competitor Williams. Rockwool ultimately terminated its sales of blown wool to Black Gold, although it continued sales to Williams and another competing installer, both of whom regularly purchased batts. Black Gold testified that it was forced to refuse many jobs in the PSC program because it could not obtain blown wool from Rockwool. Virtually all of the blown wool that Black Gold had been able to obtain from Rockwool was used in the PSC program.

In the proceedings below, Black Gold claimed that Rockwool practiced price discrimination in violation of section 2(a) ¹ by selling blown wool to Williams at a lower price than it sold the material to Black Gold, by refusing to sell batts to Black Gold at as low a price as it gave Williams, by failing to make timely deliveries of blown wool, and by refusing to sell blown wool to Black Gold. Black Gold also contended that Rockwool and Williams conspired to give Williams a competitive advantage by this price discrimination in violation of section 1 of the Sherman Act. Black Gold further claimed that Rockwool violated section 3 of the Clayton Act by tying the sale of blown wool to the sale of batts. Finally, Black Gold alleged that Rockwool's refusal to deal with Black Gold was in furtherance of the tying arrangement and amounted to a conspiracy in restraint of trade in violation of section 1 of the Sherman Act.

The trial court directed a verdict for Rockwool on the alleged tying arrangement because the court found no evidence of any anticompetitive effect. The court also directed a verdict for Rockwool on the claimed refusal to deal, finding no evidence of a contract, combination, or conspiracy. The two claims based on price discrimination went to the jury, which returned a general verdict for Black Gold in the amount of $93,350. The verdict was trebled to $280,050.

II.

THE PRICE DISCRIMINATION CLAIMS.

A. The Robinson-Patman Claim

As noted above, the alleged illegal conduct under the Robinson-Patman Act was one of two price discrimination claims upon which the jury returned a general verdict in favor of Black Gold. On appeal, Rockwool contends that its lower price to Williams did not constitute a violation of the Act because, under the method by which the PSC program was administered, the price difference did not tend to lessen competition as required by the Act. In addition, Rockwool contends that the court improperly instructed the jury that price discrimination under the Act can include discrimination with respect to timely deliveries and with respect to the amounts sold. Finally, Rockwool alleges that the court lacked jurisdiction under the Robinson-Patman Act for those sales which were entirely intrastate. ²

Section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, provides in relevant part:

"It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them."

15 U.S.C. Sec. 13(a).

The primary purpose of the Act is to protect the competitive process, not individual competitors. Foremost Pro Color, Inc. v. Eastman Kodak Co., 703 F.2d 534, 547-48 (9th Cir.1983); Atlas Building Products Co. v. Diamond Block & Gravel Co., 269 F.2d 950, 954 (10th Cir.1959); 4 J. von Kalinowski, Antitrust Laws and Trade Regulation Sec. 28.03 (1983). Thus, to establish a violation of this provision, Black Gold must show that the price differential in this case had the requisite potential to substantially affect competition. See Foremost Pro Color, 703 F.2d at 547-48; Williams Inglis & Sons Baking Co. v. ITT Continental Baking Co., 668 F.2d 1014, 1040 (9th Cir.1981) cert. denied, 459 U.S. 825, 103 S.Ct. 57, 58, 74 L.Ed.2d 61 (1982); M.C. Manufacturing Co. v. Texas Foundries "Even if the sales at different prices are contemporaneous, involve goods of like grade and quality, the price distinction is not justified by good business cause, and it causes injury to the disadvantaged purchaser, recovery under the Act is precluded absent proof that the price variance detrimentally affected competition."

Inc., 517 F.2d 1059, 1066 (5th Cir.1975), cert. denied, 424 U.S. 968, 96 S.Ct. 1466, 47 L.Ed.2d 736 (1976); Continental Oil Co. v. Frontier Refining Co., 338 F.2d 780, 782 (10th Cir.1964); see generally 4 J. von Kalinowski, supra Sec. 23.02 (1982).

M.C. Manufacturing Co., 517 F.2d at 1066.

Given the unusual and uncontroverted facts in this case, we must conclude that the price differential on blown wool purchased for use in the PSC program could not have adversely affected competition within...