Blair Foods, Inc. v. Ranchers Cotton Oil

• Decision Date: 02 January 1980
• Docket Number: No. 77-3439,77-3439
• Citation: 610 F.2d 665
• Parties: 1980-1 Trade Cases 63,104 BLAIR FOODS, INC., a corporation, Plaintiff-Counterdefendant-Appellant, v. RANCHERS COTTON OIL, a corporation; William A. Burns, an Individual; and Glen-Webb & Company of San Francisco, Inc., a corporation, Defendants- Counterclaimants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 665

610 F.2d 665

1980-1 Trade Cases 63,104

BLAIR FOODS, INC., a corporation, Plaintiff-Counterdefendant-Appellant, v. RANCHERS COTTON OIL, a corporation; William A. Burns, an Individual; and Glen-Webb & Company of San Francisco, Inc., a corporation Defendants- Counterclaimants-Appellees.

No. 77-3439.

United States Court of Appeals Ninth Circuit.

Jan. 2, 1980.

Daniel S. Mason, Furth, Fahrner & Wong, San Francisco, Cal., for plaintiff-counterdefendant-appellant.

Benjamin H. Parkinson, Harvey Leiderman, San Francisco, Cal. (argued), for defendants-counterclaimants-appellees; Philip E. Diamond, Landels, Ripley & Diamond, San Francisco, Cal., Ackerman, Johnston, Norberg, & Parkinson, San Francisco, Cal., on brief.

Appeal from the United States District Court for the Northern District of California.

Before GOODWIN and WALLACE, Circuit Judges, and BARTELS, ^* District Judge.

BARTELS, District Judge:

Appellant Blair Foods, Inc., ("Blair") brought this private antitrust action under Section Four of the Clayton Act, 15 U.S.C. § 15, seeking treble damages. Blair charged appellees Glen-Webb & Company of San Francisco, Inc., ("Glen-Webb"), Ranchers Cotton Oil ("Ranchers"), and William A. Burns, Vice President of Ranchers, with conspiracy in violation of Section One of the Sherman Act, 15 U.S.C. § 1, and appellee Glen-Webb with an attempt to monopolize in violation of Section Two of that Act, 15 U.S.C. § 2. The United States District Court for the Northern District of California, Schwarzer, J., granted appellees' motion for partial summary judgment under Rule 56 of the Federal Rules of Civil Procedure, holding that there was insufficient evidence to support either claim as a matter of law. This appeal followed.

Blair contends that the district court erred in (1) ignoring the applicable summary judgment standard for antitrust cases; (2) misapplying the "attempt to monopolize" test enunciated by this court in Lessig v. Tidewater Oil Co., 327 F.2d 459 (9th Cir. 1964); and (3) improperly granting summary judgment with respect to both the Section One and Two claims under the Sherman Act. We affirm.

I

The record of pleadings, affidavits, and depositions may be summarized as follows: From its organization in 1972 until its recent demise, Blair was engaged in the processing, repackaging, and distribution of vegetable oils and related food products. Formed by Ronald D. Scheetz and other former employees of Glen-Webb, Blair specialized in sales of mayonnaise, salad dressings, and salad oils to restaurants and other institutional consumers within the State of California and elsewhere. Glen-Webb was and still remains in the business of distributing vegetable oils and related food products, operating out of three district offices in California. As such, it was at all times relevant to this action one of Blair's direct competitors.

An essential ingredient in the manufacture, production, and processing of the commodities here involved is cotton seed oil, a viscid oil drawn from the cotton plant and purchased by both companies from time to time from Ranchers. Engaged in the manufacture and marketing of cotton seed oil and other by-products of cotton oil, Ranchers is a non-profit cooperative marketing association which controls approximately 80% Of the cotton seed oil market in California. Appellee Burns is a personal friend of William Clary, chief executive officer of Glen-Webb.

Soon after it began operations, Blair attempted with some success to establish itself in the marketplace by instituting unique customer services, such as seven-day, 24-hour operation. Within several months, Blair counted as its customers several establishments which had previously relied upon Glen-Webb for their supply of vegetable oil products. This initial success was competitively harmful to Glen-Webb and, according to Blair, caused it to undertake a deliberate course of action designed to eliminate Blair from the market by engaging in a series of predatory acts, such as offering to undercut Blair's prices, making threats and statements regarding Blair's inevitable demise, willfully failing to return 150 oil drums or containers after formation of a company for the sole purpose of purchasing oil from Blair, and filing a legal action against Blair in state court, which action was subsequently withdrawn by Glen-Webb pursuant to a settlement agreement with Blair.

Blair also relies upon various statements allegedly made by Clary and other Glen-Webb personnel indicating their specific intention to drive Blair out of business. ¹ In addition, Blair cites hearsay declarations of hostility, veiled threats, and warnings drawn from the deposition testimony of several individuals in an effort to bolster its case on appeal. As Blair admits, however, such hearsay evidence is inadmissible and may not be considered by this court on review of a summary judgment. Janich Bros., Inc. v. American Distilling Co., 570 F.2d 848, 859 (9th Cir. 1977), Cert. denied,439 U.S. 829, 99 S.Ct. 103, 58 L.Ed.2d 122 (1978). ²

In support of its claim that Glen-Webb and Ranchers illegally conspired to eliminate it from competition, Blair cites Clary's friendship with Burns, although no communication or meeting concerning Blair was alleged, and relies heavily upon Ranchers' sudden determination in 1974, after almost two years of extending credit to Blair, that Ranchers would thereafter require prepayment on all purchases by Blair of cotton seed oil, notwithstanding Blair's offer of a third-party guarantee of its obligations. This cancellation of credit, Blair asserts, constituted invidious discrimination against Blair pursuant to an agreement with Glen-Webb, which, despite an inferior record of payment, was permitted to continue purchasing on credit. When Blair asked Ranchers to ship cotton seed oil booked by Blair to the account of a third party, Burns refused, stating, "If you (Blair) send them a pound (of oil), I will tear up the contracts (between Blair and Ranchers) or I will sell them to Glencoe (Glen-Webb) . . . " Both Glen-Webb and Ranchers, however, deny the existence of any agreement, and Ranchers asserts that all credit decisions were based solely upon legitimate business considerations, which, as to Blair, included its failure to return phone calls from Ranchers' employees, its refusal to meet with Burns when he visited Blair's office to discuss amounts owed to Ranchers, and its repeated attempts to pay its bills with bad checks.

The district court's dismissal of Blair's conspiracy claim was predicated upon its finding that "(p)laintiff has come forward with no evidence from which a trier of fact could find a conspiracy," that the unilateral cancellation of credit by Ranchers is not actionable under the antitrust laws, and that no reasonable inference of conspiracy could be drawn from the evidence of social contact between Clary and Burns. As to the claim of attempt to monopolize against Glen-Webb, the court found:

(I)t is undisputed that Glen-Webb and Blair competed with some one hundred food service wholesalers all of whom were in the business of supplying restaurants and institutions. Many of these companies are as large as or larger than Glen-Webb. Thus, both plaintiff and defendant were engaged in a highly competitive market comprised of many firms in which Glen-Webb had no power to control prices or exclude competitors. Although the evidence may indicate an attitude of hostility by Glen-Webb against its former employees who had gone into competition with it by organizing Blair, it does not permit a finding of attempt to monopolize. See Mutual Fund Investors v. Putnam Management Co., (553 F.2d 620 (9th Cir. 1977)).

In reviewing the propriety of a summary judgment, we are limited to a consideration of whether there is in dispute a genuine issue of material fact, bearing in mind at the same time that summary judgment is not particularly favored in antitrust litigation. Fed.R.Civ.P. 56(c); Poller v. Columbia Broadcasting System, 368 U.S. 464, 467, 473, 82 S.Ct. 486, 488, 491, 7 L.Ed.2d 458 (1962); ALW, Inc. v. United Air Lines, Inc., 510 F.2d 52, 55 (9th Cir. 1975). ³ The burden is upon the party seeking the judgment to demonstrate the absence of any material fact and that the moving party is entitled to judgment as a matter of law. Id. In our examination of the record, we are required to draw all inferences in the light most favorable to the party opposing the motion. Id. at 53; California Pacific Bank v. Small Business Administration, 557 F.2d 218, 220 (9th Cir. 1977).

II

One of the principal arguments by Blair on appeal is predicated upon the lower court's reliance upon Glen-Webb's lack of market power with respect to the Section Two attempted monopolization claim, to which we now turn.

Section Two of the Sherman Act provides, in part, as follows:

Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, . . .

Blair contends that the district court erred in emphasizing Glen-Webb's relative size in and power to control a highly competitive market, which factor was rejected by this court in Lessig v. Tidewater Oil Co., supra, as "not in issue" in this type of case. 327 F.2d at 474.

To make out a prima facie case of attempt to monopolize under Section Two, two elements of proof are indispensable: (1) specific intent to control prices or destroy competition in any part of commerce, and (2) predatory conduct directed to the accomplishment of that unlawful purpose. Greyhound Computer Corporation v. International Business Machines Corporation,559 F.2d 488, 504 (9th Cir. 1977), Cert. denied, 434 U.S. 1040, 98 S.Ct. 782, 54 L.Ed.2d 790 (1978); Knutson v. Daily Review, Inc., 548 F.2d 795, 813-14 (9th Cir. 1976), Cert. denied, 433 U.S. 910, 97 S.Ct. 2977, 53 L.Ed.2d...