Checker Motors Corporation v. Chrysler Corporation

• Decision Date: 29 March 1968
• Docket Number: No. 64 Civ. 866.,64 Civ. 866.
• Citation: 283 F. Supp. 876
• Parties: CHECKER MOTORS CORPORATION, Plaintiff, v. CHRYSLER CORPORATION and Chrysler Motors Corporation, Defendants, Checker Taxi Company, Inc., et al., Additional Defendants on Counterclaim.
• Court: U.S. District Court — Southern District of New York

283 F. Supp. 876

CHECKER MOTORS CORPORATION, Plaintiff, v. CHRYSLER CORPORATION and Chrysler Motors Corporation, Defendants Checker Taxi Company, Inc., et al., Additional Defendants on Counterclaim.

No. 64 Civ. 866.

United States District Court S. D. New York.

March 29, 1968.

COPYRIGHT MATERIAL OMITTED

Shea, Gallop, Climenko & Gould, New York City, for plaintiff.

Kelley, Drye, Newhall, Maginnes & Warren, New York City, for defendants.

MANSFIELD, District Judge.

In this private antitrust suit for treble damages and injunctive relief pursuant to §§ 4 and 16 of the Clayton Act (15 U.S.C. §§ 15 and 26), plaintiff, Checker Motors Corporation (Checker), moves for partial summary judgment against defendants Chrysler Corporation and Chrysler Motors Corporation (collectively referred to as "Chrysler"¹), or, in the alternative, for preliminary injunctive relief. For the reasons set out in the decision, the motion is denied in all respects.

Since 1922 Checker, a New Jersey corporation with its principal place of business in Kalamazoo, Michigan, has been engaged, among other activities, in the production and sale of "purpose-built" taxicabs, i. e., automobiles designed and engineered for use as taxicabs. In producing such vehicles it has incorporated into chassis and bodies of its own manufacture engines, axles, transmissions and other parts purchased from independent suppliers.² Checker sells its taxicabs through sales offices in various cities of the United States, principally New York, Boston, Chicago and Detroit. Prior to 1963 New York City provided one of its major markets.³

Incorporated in Delaware, Chrysler is engaged in the business of manufacturing and selling automobiles, automobile accessories and parts. As one of the three major automobile colossi, Chrysler, in 1966, reported $5.6 billion in gross sales and had net earnings in the amount of $189.2 million. Chrysler's vehicles are sold in various markets, including the passenger car and taxicab markets.

Chrysler-made taxis and passenger cars are essentially the same, with a series of differences designed to satisfy, in the case of the taxicabs, the operator's need for continuous heavy duty, short-trip, stop-and-go, low fuel usage, and, in the case of the passenger car, the purchaser's desire for more comfortable riding, aesthetic appearance, quick getaway, and convenience. For example, the Chrysler 1965 Dodge Coronet model taxicab has a replaceable oil filter element, stiffer shock absorbers, springs and suspension system, special brake lining, wider wheel rims, heavier capacity battery, special lights, and special carburetor, which are features not found on the passenger car. In addition, the paint and seat-cover material of the passenger car are more stylish than those of the taxi counterpart, and the passenger car usually contains more chrome. The fundamental elements of both cars, however, including the frame and engine, are essentially the same.

Chrysler distributes its vehicles to the public via a nationwide system of independent franchised dealers. In promoting the sale of its taxis and passenger cars to the consuming public, Chrysler, like other large automobile manufacturers, engages in extensive advertising campaigns. Although Chrysler suggests a retail price for its vehicles each dealer, upon purchasing automobiles from it, assumes the risk of loss, and independently determines the retail price of automobiles purchased by it from Chrysler for resale.

In 1962, in order to promote the sale of its taxicabs, Chrysler instituted the "Commercial Fleet Value Program" ("Rebate Plan" herein), under which, throughout the United States, purchasers of two or more taxicabs from Chrysler-authorized qualified dealers could, upon completing a form and returning it to Chrysler, receive a rebate of up to $200 per taxicab from the manufacturer. In 1966 and 1967, the plan was altered to include purchasers of a single taxicab and the rebate was set at $183 per vehicle. Chrysler dealers have advertised the program, although the accounting and payments have been handled by Chrysler.

The present treble damage action was commenced in 1964. Checker's complaint alleges a combination and conspiracy between Chrysler, its subsidiaries, dealers and others, beginning in 1960, to restrain trade in the manufacture and sale of taxicabs by eliminating Checker as a competitor, excluding it from the New York City and other markets, and otherwise injure its business, and to monopolize such trade and commerce. More specifically it is alleged that Chrysler, after being advised that Checker proposed to increase its production and sales from 7,000 to 24,000 vehicles per annum, undertook to supply Checker's requirements of components for use in Checker taxicabs, private passenger automobiles and other vehicles, and to sell Checker duplicate tools, discs and fixtures at an agreed-upon low price arrangement, inducing Checker, in reliance upon such commitments, to commence re-engineering its automobile chassis and bodies for adaptation to products manufactured by Chrysler, and to construct a large number of prototype vehicles which were subjected to extensive experimental testing; that in the meantime, Chrysler in bad faith delayed preparation of a formal agreement, postponed performance of its undertakings, and proceeded to solicit Checker's taxicab clientele and to disseminate reports that Checker proposed to utilize Chrysler's motor in the manufacture of Checker taxis, thereby giving Chrysler an unfair competitive advantage and causing a substantial loss of momentum in Checker's sales and a prolonged disruption of its production.

The complaint further alleges that Chrysler sold private automobiles equipped as "taxicabs" at "unlawful, low and discriminatory prices" financed out of profits from private passenger sales, and increased its taxicab sales through the Rebate Plan

"pursuant to which Chrysler and its co-conspirators unlawfully discriminated in prices between purchasers of defendants' passenger automobiles equipped with the so-called `taxicab package' and purchasers of said automobiles not so equipped." (Complaint Par. 14(f) (i))

It was alleged that even in the absence of the Rebate Plan

"the suggested retail list prices of defendants' passenger automobiles sold for use as taxicabs were and are generally lower than the suggested retail list prices of automobiles of the identical make and model sold to the general public for use as private passenger cars, notwithstanding the fact that the automobiles sold as taxicabs include more costly extra items known as the `taxicab package'." (Complaint Par. 14(f) (ii))

The rebate accorded to purchasers of Chrysler's automobiles sold for use as taxicabs, it is alleged, was not supported by any cost justification, the program allegedly being motivated by

"defendants' recognition that the greatest volume of taxicab sales usually takes places in New York City, and that domination by defendants of the New York City taxicab market, in addition to eliminating plaintiff as a substantial competitor, would be a valuable lever and selling point by which defendants could increase their share of the passenger automobile market throughout the United States. The importance attached by defendants to dominating the New York City taxicab market as a means of furthering the sales of various of its passenger automobiles is shown by the extensive national advertising campaign defendants have constructed around its New York City taxicab sales. Said advertising campaign falsely and fraudulently represents to the public at large that many of defendants' passenger cars sold for use as taxicabs are `taxi-labs', whose performance can be meaningfully compared to defendants' private passenger car performance. Such advertising misleadingly omits any mention of the special, heavy duty `taxicab package' installed in the passenger cars equipped for use as taxicabs, which completely invalidates the comparison defendants propose to make between their passenger cars equipped for use as taxicabs and those not so equipped." (Complaint Par. 14 (f) (vii))

Chrysler's conduct is claimed to have substantially lessened competition in the line of commerce consisting of the manufacture and sale in interstate commerce of automobiles, including taxicabs. As a result of Chrysler's activities, Checker seeks $45 million in damages and an injunction permanently enjoining Chrysler, its servants, agents, employees and others in privity with them, from conspiring to destroy plaintiff's business by unlawul means.

On the present motion, only the legality of the Rebate Plan is in issue. Checker asserts that the arrangement as employed in New York City amounts to (1) a per se unlawful price fixing contract, combination, or conspiracy between Chrysler and its dealers in violation of § 1 of the Sherman Act, 15 U.S.C.A. § 1; and (2) a discriminatory pricing arrangement in violation of § 2(a) of the Robinson-Patman Act, 15 U.S.C.A. § 13 (a). As an alternative to partial summary judgment, Checker seeks a preliminary injunction against Chrysler's continuing the Rebate Plan during the pendency of this litigation.

Chrysler first contends that the motion should be denied because it is predicated on claims different from those alleged in the complaint. Although the complaint's emphasis is almost entirely on Chrysler's alleged discrimination in pricing, Paragraph 14(e) does allege that its taxicab sales have been made at "unlawful, low and discriminatory prices," which is probably sufficient to support a Sherman Act attack upon the Rebate Plan in this age of "notice" pleading. However, in view of this Court's denial of plaintiff's motion for substantive reasons, it becomes unnecessary to rest the decision on such a technical ground. With respect to the Robinson-Patman claim, there is no merit in defendants' contention. The complaint sets forth a § 2(a) price discrimination primary line...