Bostick Oil Co., Inc. v. Michelin Tire Corp., Commercial Div.

• Decision Date: 14 March 1983
• Docket Number: No. 81-1985,81-1985
• Citation: 702 F.2d 1207
• Parties: 1983-1 Trade Cases 65,271, 12 Fed. R. Evid. Serv. 1652 BOSTICK OIL COMPANY, INC., Appellant, v. MICHELIN TIRE CORPORATION, COMMERCIAL DIVISION, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1207

702 F.2d 1207

1983-1 Trade Cases 65,271, 12 Fed. R. Evid. Serv. 1652

BOSTICK OIL COMPANY, INC., Appellant, v. MICHELIN TIRE CORPORATION, COMMERCIAL DIVISION, Appellee.

No. 81-1985.

United States Court of Appeals Fourth Circuit.

Argued Dec. 9, 1982.

Decided March 14, 1983.

Robert E. Staton, Columbia, S.C. (Michael H. Quinn, Quinn, Brown, Staton & Boyle, Columbia, S.C., on brief), for appellant.

O. Doyle Martin, Greenville, S.C. (Natalma M. McKnew, Leatherwood, Walker, Todd & Mann, Greenville, S.C., James M. Micali, Asst. Gen. Counsel, Greenville, S.C., on brief), for appellee.

Before WINTER, Chief Judge, PHILLIPS, Circuit Judge, and BUTZNER, Senior Circuit Judge.

HARRISON L. WINTER, Chief Judge:

Bostick Oil Company, Inc., (Bostick) brought this private antitrust suit under various federal and state statutes when the Michelin Tire Corporation, Commercial Division, (Michelin) terminated Bostick's contract as a distributor of Michelin truck tires. At the close of Bostick's evidence at trial, the district court granted Michelin's motion for a directed verdict on the causes of action then remaining: ¹ attempt to monopolize under Sec. 2 of the Sherman Act, 15 U.S.C. Sec. 2; contract, combination or conspiracy in restraint of trade, in violation of Sec. 1 of the Sherman Act; and, unfair or deceptive trade practices violating the South Carolina Unfair Trade Practices Act, Sec. 39-5-20(a), Code of Laws of South Carolina 1976. Bostick appeals only from the judgment entered against it on its state law claim and on its two theories of the Sec. 1 Sherman Act violations, ² asserting that sufficient evidence was introduced to warrant submission of these issues to the jury. We agree, and therefore reverse and remand for a new trial. Because of our disposition of this appeal, we need address only briefly an evidentiary issue also raised by Bostick.

I.

In reviewing the grant of a motion for directed verdict under Rule 50(a), Fed.R.Civ.P., we view all evidence presented by Bostick, the nonmoving party, in the light most favorable to it, drawing all reasonable inferences in Bostick's favor, Ard v. Seaboard Coast Line Railroad Company, 487 F.2d 456, 457 (4 Cir.1973), without weighing the credibility of witnesses. Old Dominion Stevedoring Corp. v. Polskie Linie Oceaniczne, 386 F.2d 193, 197 (4 Cir.1967).

Bostick was at one time a small, family-owned oil concern based in Estill, South Carolina, which began shifting its focus to tire sales in 1967. By 1974, Bostick was offering for sale a wide range of passenger car tires and some truck tires. In April 1974, Bostick contacted Michelin, seeking to become an authorized distributor. Michelin, the marketing division of the Michelin Tire Corporation, was then expanding distribution of its radial tires and related products through numerous distributorship arrangements. ³ Responding to the inquiry, Michelin sent its district truck tire sales manager to Estill to survey Bostick's operation and prepare a dealership application. The Michelin representative noted, among other items, the type of tire service available from Bostick. Bostick's application was approved, and it entered the first of four successive one-year standard form Dealer Sales Agreement (DSA) contracts with Michelin on May 29, 1974, authorizing it to sell both passenger and truck tires.

Beginning sometime in 1975 with the employment of an experienced truck tire saleswoman, Bostick shifted the vast majority of its Michelin business into truck tire sales. During its first calendar year as a Michelin dealer, Bostick sold approximately $38,000 in truck tires and $39,000 in passenger tires of that brand. ⁴ For the calendar year 1976, Bostick's gross sales of truck and light truck tires had soared to slightly over $1,100,000 as compared to $936,827 in passenger tire sales, according to a memorandum written by Michelin's corporate sales manager for the Eastern United States. By the end of April 1978, its last fiscal year as a Michelin dealer, Bostick had sold approximately $2,000,000 worth of Michelin truck tires during the preceding twelve months. The initial impetus for this shift to truck tire sales, according to company president Joe Bostick, came from Michelin's local sales representative during 1974 and 1975, as well as the enticing quantity discounts and commissions built into Michelin's pricing structure.

In expanding its business, Bostick employed the practice of "drop-shipping", i.e., transferring the tires to the purchaser by taking an order and having tires shipped directly, without providing any initial mounting or other service. Although one provision of the Dealer Sales Agreement required Bostick to maintain facilities sufficient to "enabl[e the] Dealer to sell and service Michelin Products in a first class manner", Bostick introduced the testimony of several major truck fleet-owning customers to explain that such purchasers usually maintained their own service facilities. Joe Bostick also testified that his company maintained a service arrangement with a mechanic in Estill, and had received virtually no complaints about a lack of service from customers during the period it was a Michelin dealer.

Bostick's primary method of expanding sales was through its aggressive price cutting and rebating of commissions and quantity discounts to its customers. Until the summer of 1977, Michelin offered dealers truck tires at a basic price of 22 percent off of the manufacturer's suggested list price. From this "net billing price," Bostick or any dealer was able to subtract up to an additional 9 percent for a quantity purchase, another 2 percent discount for early payment to Michelin, and a further 2 percent discount if certain shipping arrangements were made. ⁵ Thus, Bostick was able to give as much as a 6 percent discount to the purchaser off of the "net billing price" and still sell at a gross profit; in effect, Bostick could buy a tire listed by the manufacturer as worth $100 for approximately $68, offering it for as low as approximately $73.30, while a dealer taking no advantage of discounts would have to sell the tire for $83.30 for a comparable total return on each unit sold. ⁶

Bostick's sales practices provoked complaints by various competing Michelin dealers to field and district level personnel of the tire company. One general manager of a Charleston, South Carolina, Michelin dealer during the period 1974 to 1978 testified that he had complained to Michelin of Bostick's "coming into the Charleston area and selling truck tires at prices much below what we were selling them for." Three other South Carolina Michelin dealers testified to having complained to Michelin personnel about Bostick's low prices forcing them to decrease their profit margins to compete; one stated that he preferred buying from Bostick as a wholesale supplier because in small quantities it proved cheaper and more convenient than buying directly from Michelin. Several of these dealers on cross-examination gave some support to Michelin's contention that Bostick's lack of service facilities resulted in their having to provide service to Michelin tire owners who had bought the product elsewhere. But one of the dealers explained that the cost of the tire did not reflect the cost of future service, for which the customer was charged separately as provided, and that service had become for that dealer "a big key to our growth" representing approximately 50 percent of his total business volume.

Internal Michelin memoranda, and testimony of Michelin personnel at various levels, showed that numerous such complaints were passed along to middle and upper-level management, as well as being originated by Michelin field and sales representatives themselves. As early as August 1975, a field representative's monthly report to management quoted Bostick's discount pricing and noted that another dealer "will not meet this price." By the spring of 1976, complaints about Bostick had reached Jean Pierre Duleyrie, Michelin's vice-president in charge of sales, prompting him to send a corporate sales manager (the Michelin official immediately below Duleyrie) to talk directly with Joe Bostick in April 1976. Though the actual motivation behind the meeting and its contents were much in dispute at trial, the outcome was a renewal of Bostick's dealership for 1976-77 and possibly a promise by Bostick to expand service facilities. The complaints by competitors and Michelin sales personnel nonetheless persisted during the remainder of Bostick's distributorship.

Shortly before the May 29 renewal date of Bostick's dealership contract in 1977, Michelin's district manager approached Joe Bostick to explain the company's proposal to enroll Bostick in a "National Accounts" program. Various large-volume purchasers designated "national accounts" were billed and their accounts collected centrally through Michelin, while distributors such as Bostick continued to perform the actual selling and delivery of tires for which they were paid a commission. Participation in the program required disclosure of customer lists to Michelin, and loss of the ability in the first instance to quote a price for the tires. Continuation as a Michelin dealer was not made expressly conditional on joining the National Accounts program; by the stated terms, a dealer could continue to sell to some accounts as before and list others as National Accounts in any desired mix.

Michelin explained, through cross-examination, that the National Accounts pricing structure proved capable of giving a dealer an advantage over the regular distribution terms. A National Accounts customer was billed by Michelin at a 20 percent discount off the list price; the dealer who delivered the tire from his stock was credited by Michelin at 22 percent off suggested list price and was paid a 12 percent commission on each National Accounts tire sold. ⁷ Thus the dealer could rebate a substantial part of the commission to...