Daiflon, Inc. v. Allied Chemical Corp.
| Decision Date | 24 May 1976 |
| Docket Number | No. 74-1796,74-1796 |
| Citation | 534 F.2d 221 |
| Parties | 1976-1 Trade Cases 60,829 DAIFLON, INC., Plaintiff-Appellant, v. ALLIED CHEMICAL CORPORATION et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Robert S. Rizley and Joel L. Wohlgemuth, Tulsa, Okl., for plaintiff-appellant.
Coleman Hayes, Oklahoma City, Okl. (John S. Athens, Tulsa, Okl., for Allied Chemical Corp.; Herbert Dym, Washington, D.C., for E. I. du Pont de Nemours and Co.; James M. Sturdivant, Tulsa, Okl., for Kaiser Aluminum and Chemical Sales, Inc. and Kaiser Aluminum and Chemical Corp.; Peter Bradford, Oklahoma City, Okl., and Henry Kolowrat, Philadelphia, Pa., for Pennwalt Corp.; J. L. Weigand, Jr., Wichita, Kan., for Racon Inc.; and D. Kent Meyers, Oklahoma City, Okl., for Union Carbide Corp., on the brief), for defendants-appellees.
Before HILL, SETH and DOYLE, Circuit Judges.
This appeal follows the trial court's dismissal of an antitrust action brought by appellant Daiflon, Inc., against numerous corporations, appellees in this proceeding. Appellant was engaged from January, 1969, to October, 1972, in the business of importing refrigerant gas from Japan, repackaging the gas, and distributing the gas to wholesalers and retailer contractors in a market of about thirty states. The appellees are domestic manufacturers and distributors of refrigerant gas. On July 12 1972, appellant commenced this action against these appellees and a trade association (later dismissed as a party without prejudice).
Ultimately, appellant's allegations were incorporated into a second amended complaint. Appellant alleged the appellees "engaged in an unlawful combination and conspiracy in restraint of the aforesaid interstate trade and commerce in refrigerant gases in violation of § 1 of the Sherman Act (15 U.S.C. § 1)." This combination and conspiracy was alleged to have sought to eliminate price competition in the sale and distribution of refrigerant gas used for replacement purposes. Appellant also alleged appellees had attempted to monopolize the manufacture and distribution of refrigerant gases by using predatory pricing of refrigerant gas for replacement purposes and disparagement of appellant and its products, in violation of § 2 of the Sherman Act (15 U.S.C. § 2). Appellant further claimed appellees had, in fact, monopolized the market for refrigerant gases in violation of § 2 of the Sherman Act. The damages were believed to be more than $3,000,000; elements of those damages were alleged to include (1) lost profits from sales not made due to the violations, (2) lower prices appellant had to charge on sales because of the absence of competitive conditions, (3) substantial injury to appellant's good will, and (4) the irrevocable and complete destruction of appellant's business. Appellant requested a judgment in an amount three times its actual damages and an injunction.
The facts leading to dismissal of this action revolve around one interrogatory. The interrogatory in issue is No. 2 in the second set of interrogatories to appellant. It was served on July 27, 1973, and reads as follows:
2. With respect to each individual item of refrigerant gas identified in the answer to Interrogatory No. 1, state your direct material cost, direct cost of production, overhead cost of production, selling expense, and general and administrative expense per pound prepaid freight to (1) Houston, Texas, (2) Oklahoma City, Oklahoma, (3) Kansas City, Missouri, and (4) Minneapolis, Minnesota, as of the first of each calendar month of plaintiff's commercial operations.
Appellant filed answers and objections to this set of interrogatories on September 24, 1973. As to Interrogatory No. 2 appellant said:
The books and records of Daiflon, Inc. pertaining to cost data have been in the offices of Conner, Winters, Ballaine, Barry and McGowen, attorneys for Allied Chemical Corporation, for approximately three weeks. Before that time, these documents were in transit between Galveston, Texas and Tulsa, Oklahoma for approximately ten (10) days. Richard E. Carter, plaintiff's president and the person solely responsible for preparing the answer to this interrogatory, resides in Galveston and has not had access to the pertinent raw cost data for the last thirty (30) days due to the circumstances described above. Moreover, the information requested by this interrogatory is highly detailed, and it is anticipated that plaintiff will require an additional sixty (60) days from the date its books and records are returned to it to prepare full and complete answers. In this regard, it should be noted that defendants received, by stipulation, ninety (90) days within which to answer plaintiff's interrogatories involving cost information.
On October 9, 1973, appellant filed an amended answer to Interrogatory No. 2. That answer was as follows:
The information sought in this interrogatory may be derived or ascertained from the business records of the plaintiff. The burden of deriving or ascertaining the answer to the interrogatory is substantially the same for defendants as for plaintiff. Therefore, pursuant to Rule 33(c), F.R.C.P. 1 plaintiff has and will continue to afford defendants a reasonable opportunity to examine, audit or inspect the business records of the plaintiff which contain the information sought herein.
Appellees were not satisfied with this answer and filed a motion to compel appellant to answer the Interrogatory. Appellant responded and a hearing was held. The court ruled appellant had to answer the Interrogatory "in good faith, fully and completely" and granted appellant sixty days for the task. The court also stated:
This matter of cost in matters of the plaintiff and likewise of the defendant result in a commitment which may show or fail to show the cause of the company going broke, or defunct; and if it went defunct because of overhead or cost or any of these other elements and not because of any Sherman antitrust violations, then there lays the case, the cause of action.
The court also stated to appellant's counsel that he did not have to follow appellees' precise manner in setting out the information and told counsel to ". . . give these costs in your manner, that of any qualified CPA."
Appellant filed another amended response on January 28, 1974. The response was composed of a schedule labeled "Daiflon, Inc. Management Advisory Statement For The Eight Months Ended October 31, 1971." Appellant's counsel averred that this cost information was representative of appellant's costs for the years of 1970, 1971 and 1972.
Appellees, however, were dissatisfied with this response and filed on February 5, 1974, a second motion to compel appellant to answer Interrogatory No. 2. A hearing was held on February 20, 1974. At that hearing the trial judge warned appellant's counsel in the following manner.
So I don't want to dismiss your lawsuit, Mr. Rizley, but let's look at it factually. If you can't give these costs, not average costs or periodic costs in sixty or ninety days give you whatever you want but if you don't do that, you can expect this Court to dismiss your lawsuit.
In a written order, the trial court found that the second amended answer failed to satisfy the court's order and that "the attachment to plaintiff's answer is only an advisory statement for a period of eight months ending October 31, 1971, and that one of the principal questions in this action is whether or not plaintiff's financial difficulties were caused by acts and conduct of the defendants or caused by the cost and operation of its business." Appellant was granted 60 days to answer "in good faith setting out in detail its cost for the years involved for the production and distribution of refrigerant gas."
Appellant received one time extension and filed its third amended answer on May 1, 1974. The answer was an attached schedule entitled "Daiflon, Inc. Unaudited Statement of Cost of Goods Sold" and covered four years (March 1, 1969, to February 28, 1973).
On May 10, 1974, appellees filed, pursuant to F.R.Civ.P. 37(b)(2)(C) 2 a motion to dismiss the action. The following are some of the alleged inadequacies in the response: (1) information by year not by month; (2) information only by type of gas not by cylinder size; and (3) incomplete information reflecting general and administrative costs incurred in production and no information regarding distribution costs. Appellant filed a written response together with an affidavit from James R. Robertson, a CPA who prepared the worksheet answer. Robertson stated that appellant's books do not contain information from which an allocation of costs associated with each cylinder size can be made; appellant's accounting methods do not accrue costs and expenses at the end of each month, and inventories were taken at the end of each year or as required (consequently monthly cost information cannot be prepared); costs of distribution with respect to each type of gas varied based upon the type of sale and the appellant's books contain no analysis with respect to sales which were F.O.B. plant, F.O.B. destination, prepaid or freight allowed (several hundred more hours would be required to analyze these costs); deposits on steel cylinders, amortization of steel cylinder inventories and deposits in excess of costs are not expense items but merely reflect profits made on deposits on containers which were not returned; appellant's books do not breakdown sale expense on a per pound basis or contain a schedule showing how many pounds each salesman sold; general administrative expenses are not assignable to cylinder size or type of gas; interest and banking charges on letters of credit are a fluctuating expense and are not assignable to refrigerant grade or cylinder size.
Appellees responded to this answer and then the trial court, without a prior hearing, entered an...
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