Checker Motors Corporation v. Chrysler Corporation

• Decision Date: 06 January 1969
• Docket Number: Docket 32406.,No. 81,81
• Citation: 405 F.2d 319
• Parties: CHECKER MOTORS CORPORATION, Plaintiff-Appellant, v. CHRYSLER CORPORATION and Chrysler Motors Corporation, Defendants-Appellees, Checker Taxi Company, Inc., et al., Additional Defendants on Counterclaim.
• Court: U.S. Court of Appeals — Second Circuit

405 F.2d 319 (1969)

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

No. 81, Docket 32406.

United States Court of Appeals Second Circuit.

Argued October 16, 1968.

Decided January 6, 1969.

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

Robert Ehrenbard, Clark J. Gurney, Dale A. Schreiber, Kelley, Drye, Newhall, Maginnes & Warren, New York City, for defendants-appellees.

Before WATERMAN and MOORE, Circuit Judges, BONSAL, District Judge.^*

WATERMAN, Circuit Judge:

Plaintiff, Checker Motors Corporation (Checker), is a New Jersey corporation engaged principally in the production and sale of the familiar "Checker" taxicabs. The defendants, Chrysler Corporation, the third largest automobile manufacturer in the United States, and its wholly owned sales subsidiary, Chrysler Motors Corporation (Chrysler), are competitors of Checker in the taxicab market. In April 1964 Checker, pursuant to §§ 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26, commenced a private suit for treble damages and injunctive relief, alleging numerous violations by the defendants of the antitrust laws. The instant appeal, however, deals only with the legality of a national rebate plan (Commercial Fleet Value Program) employed by Chrysler since 1962 whereby the purchase of a taxicab from any authorized Chrysler dealer entitles the buyer to receive an automatic cash rebate.¹ The plan operates without any participation by Chrysler dealers; upon application to Chrysler by purchasers of commercial fleet vehicles the cash discount, a sum which is not contingent upon the purchase price charged by the dealer, is paid to the buyers directly by Chrysler. The dealers do, however, partake in some of the advertisement of the program.

In the court below Checker moved for partial summary judgment. It claimed that the rebate plan as used in the New York City market² constituted (1) a per se price-fixing violation of § 1 of the Sherman Act, 15 U.S.C. § 1; and (2) a discriminatory pricing arrangement in violation of § 2(a) of the Robinson-Patman Act, 15 U.S.C. § 13(a). Additionally, as an alternative to its motion for partial summary judgment, Checker sought a preliminary injunction enjoining Chrysler from maintaining the rebate plan during the pendency of the litigation. Judge Mansfield of the United States District Court for the Southern District of New York denied both the motion for partial summary judgment and the motion for a preliminary injunction pendente lite. Judge Mansfield's opinion is reported at 283 F.Supp. 876 (SDNY 1968). Pursuant to 28 U.S.C. § 1292(a) (1), Checker now appeals the portion of the district court's order that denied the preliminary injunction. Our review is limited accordingly.

The district court held that the charge that Chrysler's rebate plan violates the Robinson-Patman Act is a question of fact to be determined at trial. Checker does not quarrel with that part of the decision below, and therefore we need not concern ourselves with the district court's disposition of the Robinson-Patman claim. Rather, in reviewing the propriety of the district court's denial of Checker's request for a preliminary injunction, only two questions warrant our attention:

(1) Is Chrysler's rebate plan a price-fixing arrangement, and thus, illegal per se under § 1 of the Sherman Act; if so plaintiff may have been entitled to final judgment on the merits;³ and

(2) If the plan is not illegal per se did the district court abuse its discretion in declining to enjoin use of it pending a further test of the plan's legality at trial. For the reasons to follow, we answer both questions in the negative and affirm the decision below.

A lengthy discussion is unnecessary. The per se illegality of price-fixing agreements under the Sherman Act is a principle to which our courts have consistently adhered. See United States v. New Wrinkle, Inc., 342 U.S. 371, 377, 72 S.Ct. 350, 96 L.Ed. 417 (1952); United States v. National Ass'n of Real Estate Boards, 339 U.S. 485, 489, 70 S.Ct. 711, 94 L.Ed. 1007 (1950); United States v. Masonite Corp., 316 U.S. 265, 274, 62 S. Ct. 1070, 86 L.Ed. 1461 (1942); United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129 (1940); United States v. Trenton Potteries Co., 273 U.S. 392, 47 S.Ct. 377, 71 L.Ed. 700, 50 A.L.R. 989 (1927). The Supreme Court has said that any arrangement which in any manner "tampers with price structures" constitutes unlawful price-fixing, Socony-Vacuum, supra, 310 U.S. at 221, 60 S.Ct. 811. See cases collected by Judge Mansfield below, 283 F.Supp. at 882. Nevertheless, determining whether a particular scheme should be classified as a price-fixing device has not always been an easy task. Compare the above cases with Appalachian Coals, Inc. v. United States, 288 U.S. 344, 53 S.Ct. 471, 77 L.Ed. 825 (1933); Nat'l Ass'n of Window Glass Mfrs. v. United States, 263 U.S. 403, 44 S.Ct. 148, 68 L.Ed. 358 (1923); Chicago Board of Trade v. United States, 246 U.S. 231, 38 S.Ct. 242, 62 L.Ed. 683 (1918); United States v. Columbia Pictures Corp., 189 F.Supp. 153 (SDNY 1960).

In Susser v. Carvel Corporation, 332 F.2d 505, 510 (2 Cir.), cert. granted, 379 U.S. 885, 85 S.Ct. 158, 13 L.Ed.2d 91 (1964), cert. dismissed as improvidently granted, 381 U.S. 125, 85 S.Ct. 1364, 14 L.Ed.2d 284 (1965), we held that an ice cream manufacturer's practice of recommending a retail price to its franchised dealers was lawful where "the franchise provisions explicitly reserved to the individual dealer the right to set whatever price he desired" and where no attempts to enforce the price structure were shown. Similarly, in the case at bar, the district court declined to find that Chrysler's rebate plan is unlawful per se under § 1 of the Sherman Act for there is an absence of proof that the plan tends to "affect the exercise of competitive pricing discretion, or to affect or tamper with the range, level, scale, or amount of the price paid for Chrysler taxicabs. * * *." Rather, the court viewed the plan as a mere promotional device, reasoning as follows:

On its face Chrysler\'s Rebate Plan does not curtail the dealer\'s pricing discretion. Each dealer is free (1) to raise retail taxicab prices, thus nullifying the effect of the rebate; (2) to keep his prices constant and thus render Chrysler taxicab price competitive vis a vis General Motors, Ford, Checker and other automobile makers who grant similar rebates; or (3) to lower his prices still further in competition against both Chrysler and non-Chrysler dealers alike. No evidence has been offered to the effect that the $183 rebate has even the slightest tendency to restrict in any way the dealer\'s independent decision and determination as to the retail sales price quoted by him to customers for Chrysler taxicabs. The most that appears from the record before us is that the plan manifests to the taxicab purchaser a desire on Chrysler\'s part to promote competitive sale of its taxis, at least to the extent of giving the appearance of a price advantage to the customer in the form of a $183 rebate. Possibly the practice acts as a psychological inducement to the customer that cannot be realized through a direct price reduction to the dealer in the identical amount which would, as a practical matter, enable the dealer in his discretion to reduce his price accordingly. Certainly the marketplace is full of similar manufacturer-originated promotional sales "gimmicks," such as "free goods" in the grocery and drug trades, coupons entitling the holder to cash or discounts, and the like, which do not run afoul of the Sherman Act in the absence of a showing of impropriety. The plan does not give as much practical pricing flexibility to the Chrysler dealer as would a direct $183 price reduction in the wholesale price, since the customer, rather than the dealer, is automatically entitled to the rebate upon purchase of a Chrysler taxicab, whereas if Chrysler reduced the price to its dealers by $183, bargaining between each dealer and his customer might ensue to determine how much of the reduction, if any, would be passed along to the retail customer. However, this is an illusory distinction, since the dealer has the freedom to increase his retail price to offset the $183 rebate. 283 F.Supp. at 882-883.

Indeed, all of the evidence indicates that the Chrysler dealers are free to sell at their own prices and that the manufacturer's rebate plan is in the nature of an advertising expedient. Contrary to appellant's contentions, the plan lends no assurance to Chrysler that the entire price cut will be passed on to its dealers' customers. Nor does the availability to Chrysler of an alternative program whereby their dealers would directly receive the price discount and the individual dealers could thereafter decide whether to pass all or part of the price reduction on to their customers prohibit Chrysler's use of the discount device to which appellant objects. All that is required by § 1 for the discount device employed by Chrysler to be valid is that the pricing independence of the individual dealer remain unimpeded. Accordingly, we find the instant scheme falls squarely within our holding in S...