Crane & Shovel Sales Corp. v. Bucyrus-Erie Co.

• Decision Date: 17 December 1987
• Docket Number: No. 87-3030,BUCYRUS-ERIE,87-3030
• Citation: 854 F.2d 802
• Parties: , 1988-2 Trade Cases 68,166 CRANE & SHOVEL SALES CORPORATION, Plaintiff-Appellant, v.CO., Bucyrus Construction Products, Northwest Engineering Co., Jerry A. Moss, Charles Sanford, GPS Equipment, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 802

854 F.2d 802

57 USLW 2130, 1988-2 Trade Cases 68,166

CRANE & SHOVEL SALES CORPORATION, Plaintiff-Appellant, v. BUCYRUS-ERIE CO., Bucyrus Construction Products, Northwest

Engineering Co., Jerry A. Moss, Charles Sanford,

GPS Equipment, Defendants-Appellees.

No. 87-3030.

United States Court of Appeals,

Sixth Circuit.

Dec. 17, 1987.

Decided Aug. 4, 1988.

Egidijus Marcinkevicius, Algis Sirvaitis & Assoc., S. Melvin Kociubes (argued), Cleveland, Ohio, for plaintiff-appellant.

Edward C. Schmidt (argued), Roy A. Powell, Rose, Schmidt, Chapman, Duff & Hasley, Pittsburgh, Pa., Paul Michael Pohl, Jones, Day, Reavis & Pogue, Cleveland, Ohio, for Bucyrus-Erie Co.

Eric M. Oakley, Frances Floriano Goins (argued), Squire, Sanders & Dempsey, Cleveland, Ohio, for Northwest Engineering, Moss, Sanford & GPS.

Before JONES, WELLFORD and BOGGS, Circuit Judges.

BOGGS, Circuit Judge.

Plaintiff-appellant Crane & Shovel Sales Corporation (Crane) appeals the district court judgment granting dismissal pursuant to Fed.R.Civ.P. 12(b)(6) of its complaint alleging that defendants-appellants Bucyrus-Erie Co. (B-E), Bucyrus Construction Products (BCP), Northwest Engineering Co., Jerry A. Moss (Moss), Charles Sanford (Sanford), and GPS Equipment Corporation (GPS) restrained trade in violation of Section 1 of the Sherman Anti-Trust Act, and Chapter 1331 of the Ohio Revised Code (analogous state antitrust law.) ¹ This case presents intriguing questions concerning the legal sufficiency of an antitrust complaint. For the reasons set forth below, we affirm.

I

On May 16, 1986, Crane filed a complaint in district court essentially alleging that the defendants violated the Sherman Anti-Trust Act, and analogous state antitrust law, by conspiring to effect its termination as the distributor of BCP construction machinery parts, and the termination of all other similarly situated distributors for the Ohio and West Virginia area, and in causing an exclusive territorial distributorship for those parts to be given to GPS, a corporation formed shortly after Crane was terminated as a BCP distributor. While the defendants dispute certain facts in the complaint, we, for the purpose of reviewing a granted 12(b)(6) motion to dismiss, assume those facts to be true.

As the complaint states, in March 1984 plaintiff Crane, an Ohio corporation engaged in the business of selling parts for and making repairs to cranes and other construction equipment, was the distributor of construction machinery parts produced by defendant B-E. B-E was a manufacturer of construction equipment and other industrial products with its principal place of business in South Milwaukee, Wisconsin. On March 15, 1985, BCP, a manufacturer of construction equipment and other products with its principal place of business in Green Bay, Wisconsin, bought the construction machinery division of B-E, and permitted Crane to continue distributing the construction machinery parts made by its newly acquired division. Defendant BCP is a division of defendant-appellee Northwest Engineering Company, which is not alleged to have been an active participant in any conspiracy to restrain trade.

Sometime before February 20, 1986, defendant Moss ceased employment with B-E, and began employment with BCP as its Chief Operating Officer. On February 20, 1986, Moss, on behalf of BCP, orally advised Crane that after April 15, 1986 it could no longer distribute BCP construction machinery parts. This oral advice was confirmed by letter dated February 26, 1986. Crane alleged that it had distributed BCP parts without written contract, and without problem, for about one year before BCP indicated that Crane could no longer sell those parts for it. Crane further alleged that it had invested considerable time and money in the distribution of these parts in reliance on oral assurances from BCP that it would continue to use Crane as its distributor. Moss, an employee of B-E in its construction machinery division before B-E sold that division to BCP, Crane alleged, followed the product line to its new owner. Only thereafter, Crane stated in the complaint, was it terminated as a distributor of BCP construction machinery parts.

In March 1986, GPS was formed. Moss was both a substantial shareholder and an officer of GPS. Defendant Sanford was also a substantial shareholder and officer of GPS, and, from the complaint, it appears had no interest in or employment with B-E, BCP, or Northwest Engineering. In March 1986, GPS was made the exclusive distributor of BCP construction machinery parts for the states of Ohio and West Virginia. Crane specifically alleged that BCP and the other defendants conspired to terminate Crane's distributorship rights "so that a new distributorship, with whom defendant Moss has an economic interest, could take over plaintiff (Crane's) business." After April 15, 1986, Crane's distributorship rights were permanently terminated. According to Crane's complaint, all of these actions were "entered into with the purpose and effect of eliminating plaintiff as a competitor and to destroy the business of plaintiff."

II

On June 10, 1986, B-E filed a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief could be granted on the federal and state antitrust claims. On August 5, 1986, Northwest Engineering Company, Moss, Sanford, and GPS filed similar motions. Each defendant argued, inter alia, that Crane had failed to state a cause of action under the Sherman Anti-Trust Act and analogous state law regarding their actions as alleged in the complaint.

On December 8, 1986, the district court granted all of the motions to dismiss. In the district court's view, Crane had simply failed to allege sufficient facts to establish a conspiracy to restrain trade under the Sherman Anti-Trust Act. Regarding B-E, it stated that "[t]here is no inference that this court can find to include B-E in an alleged conspiracy." The district court concluded that "the sole fact that defendant Moss had been a B-E employee in the construction machinery division before B-E sold it to BCP does not indicate any present interest B-E has in the distribution of BCP product," nor does it indicate any violation of the Sherman Anti-Trust Act on Moss's part.

The district court held that Crane's allegations that BCP conspired with Moss and Sanford to exclude Crane from distributing construction machinery parts were too general to state a conspiracy in restraint of trade under the Sherman Anti-Trust Act. In the district court's view, "[t]he substitution of one distributor for a product with another distributor does not in itself restrain trade within the meaning of the [Sherman Anti-Trust] statute." It stated that "[a] refusal to deal does not become illegal under the Sherman Act unless 'it produces an unreasonable restraint of trade, such as price fixing, elimination of competition or the creation of a monopoly,' " quoting from Ace Beer Distributors, Inc. v. Kohn, 318 F.2d 283, 287 (6th Cir.), cert. denied, 375 U.S. 922, 84 S.Ct. 267, 11 L.Ed.2d 166 (1963). The fact that Moss, a former employee of B-E and at the time Chief Operating Officer of BCP, was interested in GPS which was awarded an exclusive distributorship of BCP construction machinery parts, did not, in the district court's view, distinguish Crane's case from a classic "jilted distributor" case for which no recovery under Section 1 of the Sherman Act is available. As to GPS, the district court found it was not in existence at the time the decision was made by Moss to terminate Crane as a distributor of BCP construction machinery parts, and so could not have been part of a conspiracy to restrain trade. We are in essential agreement with the district court's analysis and conclusions, and accordingly assess that complaint in terms of its allegations of restraint of trade.

III

Section 1 of the Sherman Anti-Trust Act states that "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign states, is declared to be illegal." 15 U.S.C. Sec. 1. In Davis-Watkins Co. v. Service Merchandise, 686 F.2d 1190, 1195-96 (6th Cir.1982), we held that "to establish a claim under section 1, the plaintiff must establish that the defendants contracted, combined or conspired among each other, that the combination or conspiracy produced adverse, anticompetitive effects within relevant product and geographic markets, that the objects of and conduct pursuant to that contract or conspiracy were illegal and that the plaintiff was injured as a proximate result of that conspiracy." (citation omitted).

The essential elements of a private antitrust claim must be alleged in more than vague and conclusory terms to prevent dismissal of the complaint on a defendant's 12(b)(6) motion. Hohensee v. Akron Beacon Journal Publishing Co., 174 F.Supp. 450, 452 (N.D.Ohio 1959), aff'd, 277 F.2d 359 (6th Cir.), cert. denied, 364 U.S. 914, 81 S.Ct. 277, 5 L.Ed.2d 227 (1960). Since either conspiracy or restraint of trade is an essential element of a Section 1 Sherman Anti-Trust claim, failure to allege either one justifies dismissal of an antitrust claim. Havoco of America, Ltd. v. Shell Oil Company, 626 F.2d 549, 557 (7th Cir.1980) (insufficient allegations of anticompetitive effect); Stewart v. Hevelone, 283 F.Supp. 842, 845 (D.C.Neb.1968) (insufficient allegations of conspiracy).

Courts have discerned two major types of antitrust conspiracies to restrain trade: horizontal and vertical. Horizontal conspiracies involve agreements among competitors at the same level of competition to restrain trade, such as agreements among manufacturers to fix prices for a given product and geographic market, or among distributors to fix prices for a given market. Vertical conspiracies, on the other hand, involve agreements between competitors at different levels of competition to restrain trade, such as agreements between...