Foremost Pro Color, Inc. v. Eastman Kodak Co.

• Citation: 703 F.2d 534
• Decision Date: 23 February 1983
• Docket Number: No. 80-5629,80-5629
• Parties: 1983-1 Trade Cases 65,239, 35 UCC Rep.Serv. 1087 FOREMOST PRO COLOR, INC., a California corporation, individually and on behalf of all other similarly situated, Plaintiff-Appellant, v. EASTMAN KODAK COMPANY, a New Jersey corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 534

703 F.2d 534

1983-1 Trade Cases 65,239, 35 UCC Rep.Serv. 1087

FOREMOST PRO COLOR, INC., a California corporation individually and on behalf of all other similarly situated, Plaintiff-Appellant, v. EASTMAN KODAK COMPANY, a New Jersey corporation, Defendant-Appellee.

No. 80-5629.

United States Court of Appeals Ninth Circuit.

Argued and Submitted June 8, 1982.

Decided Feb. 23, 1983.

Robert C. Fortune, (argued), Downey, Cal., for plaintiff-appellant.

Neil M. Soltman (argued), Philip F. Westbrook, Thomas M. McCoy, O'Melveny & Myers, Los Angeles, Cal., for defendant-appellee.

Appeal from the United States District Court for the Central District of California.

Before GOODWIN, WALLACE, and PREGERSON, Circuit Judges.

WALLACE, Circuit Judge:

Foremost Pro Color, Inc. (Foremost) appeals from the district court's judgment for Eastman Kodak Co. (Kodak). The district court dismissed Foremost's antitrust claims for failure to state a claim upon which relief could be granted. The court then granted Kodak's motion for summary judgment on four of Foremost's five breach of contract claims. After Foremost voluntarily dismissed the remaining contract claim, the district court entered final judgment for Kodak. We affirm.

I

Kodak is the preeminent firm in the amateur photographic industry in this country, enjoying a dominant position in the markets for photographic film and conventional amateur still cameras. For example, over eighty percent of all photofinishing--the development of negatives and the printing of photographs--is conducted with Kodak-manufactured photofinishing equipment, photographic paper and chemicals.

Foremost is an authorized Kodak dealer and an independent photofinisher. As a dealer, Foremost has purchased photographic film, paper and chemicals from Kodak for resale to consumers. As a photofinisher, Foremost has purchased photographic equipment, paper and chemicals from Kodak and used them in the photofinishing process on orders placed by its consumer customers. Because Kodak is also a photofinisher, although at a significantly smaller level than in the past as a result of a 1954 consent decree negotiated with the United States Department of Justice, Foremost is both a photofinisher customer and competitor of Kodak.

Kodak's dominance of the photographic film and amateur still camera markets "is no doubt due to the firm's history of innovation." Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 269 (2d Cir.1979), cert. denied, 444 U.S. 1093, 100 S.Ct. 1061, 62 L.Ed.2d 783 (1980) (Berkey ). It is one of those innovations which ignited the present controversy. Similar to Berkey, this case arises out of Kodak's undisclosed development and 1972 introduction of its then-newest line of cameras, the 110 "pocket instamatic," and its supporting photographic system. That system included a new generation of film (Kodacolor II), photographic paper, and photographic film processing and printing chemicals. The relevant history of the development and introduction of this system is well-outlined in Berkey. Id. at 276-78.

Foremost argues that this introduction of a new, integrated photographic system violated several provisions of the antitrust laws. First, it contends that the introduction constituted monopolization and attempted monopolization of the "amateur photographic market" in the United States in violation of section 2 of the Sherman Act, 15 U.S.C. Sec. 2. Second, Foremost claims that because the 110 cameras could only use new Kodacolor II film and because this film could only be processed with the new papers and chemicals, Kodak implicitly and unlawfully tied the sale of cameras to film, film to chemicals, and chemicals to paper and film in violation of section 1 of the Sherman Act, 15 U.S.C. Sec. 1, and section 3 of the Clayton Act, 15 U.S.C. Sec. 14. Finally, Foremost maintains that Kodak discriminated against it in the supplying of technical photographic assistance and in the timeliness of deliveries, in violation of section 2(e) of the Robinson-Patman Act amendments to the Clayton Act, 15 U.S.C. Sec. 13(e), and discriminated against it in prices and credit terms in violation of section 2(a) of the same statute, 15 U.S.C. Sec. 13(a).

Although the facts of Foremost's contract claims are more complex, the legal issues they raise are easily analyzed. The jurisdiction of the district court over these state law claims rested upon diversity of citizenship. We give substantial deference to the construction of state law by a district judge sitting in that state and will reverse only if the district judge's interpretation of state law is clearly wrong. See, e.g., Begay v Kerr-McGee Corp., 682 F.2d 1311 (9th Cir.1982). We turn first to the entry of summary judgment on the breach of contract claims.

II

Foremost's first contract claim was voluntarily dismissed and is not before us. Its second contract claim alleged that in August 1972, more than three years prior to the commencement of this action, Kodak breached a contract to "assist and supervise" Foremost's efforts to convert its photofinishing operations to utilize the new Kodak chemicals and paper required to develop film from the 110 instamatic camera. The district court granted summary judgment for Kodak on this claim, concluding that (1) the undisputed facts demonstrated that Kodak had not breached the alleged contract, and (2) in the absence of a written agreement, Foremost's claim was barred by California's two-year statute of limitations for actions based on non-sales, oral contracts. Cal.Civ.Proc.Code Sec. 339 (West 1982).

We need not decide whether the district court ruled correctly on the issue of breach because we affirm on the alternative statute of limitations ground. Foremost argued to the district court, and on appeal, that the alleged contract underlying this claim was an August 1, 1972 letter from Kodak. Actually it was a newsletter from Kauffman, Kodak's Manager for Professional and Finishing Markets, announcing the development of the new chemicals and papers to the photofinishing trade. However, Fortune, the president of Foremost, testified that this letter was not the written contract pleaded in Foremost's complaint and that a similar document, the author of which he could not recall, was the contract pleaded. Foremost never produced this alleged written contract. Thus, the district court was not clearly wrong in granting summary judgment for Kodak on this claim pursuant to California's two-year statute of limitations for breach of contract claims "not founded upon an instrument in writing." Cal.Civ.Proc.Code Sec. 339.

Foremost argues that it had a "unilateral" or "implied" contract with Kodak for technical assistance, based upon Kodak's consistent offers of technical assistance to it and other photofinishers, to which the four-year limitations period of Cal.Com.Code Sec. 2725 (West Supp.1982) applies. Even assuming that Kodak's conduct was sufficient to support such an implied contract, however, there remained no material question of fact. Section 2725 applies only to contracts for the sale of goods. See id. Sec. 2725(1) (four-year limit for "any contract for sale"); id. Sec. 2106(1) (defining "contract for sale"). The contract alleged and testified to by Foremost was a contract to provide "assistance and supervision" for Foremost's conversion of older equipment purchased from another manufacturer. Therefore, the alleged contract in no way involved the sale of goods by Kodak.

Foremost's third and fourth contract claims alleged that Kodak's untimely delivery of certain photofinishing equipment ordered by Foremost breached two written contracts. The undisputed facts show that the alleged contracts upon which Foremost relies in both instances are purchase order forms submitted by Foremost to Kodak through the latter's sales representatives, that only one could be located by the parties and it specified no delivery date, and that such order forms specifically state that all orders are "subject to acceptance" by Kodak. The district court concluded that there was no contract underlying either claim because the purchase orders were merely offers to buy, inviting Kodak's acceptance either by a prompt promise to ship or by prompt or current shipment under Cal.Com.Code Sec. 2206(1)(b) (West 1964).

The district court was not clearly wrong in this application of section 2206(1)(b). The weight of authority is that purchase orders such as those at issue here are not enforceable contracts until they are accepted by the seller. See Restatement (Second) of Contracts Sec. 26 comment d (1981); 1 Corbin on Contracts Sec. 24, at 73-74 (1963); Zinni v. Royal Lincoln-Mercury, Inc., 84 Ill.App.3d 1093, 40 Ill.Dec. 511, 406 N.E.2d 212 (1980). Foremost has cited no California cases to the contrary. Since there was no promise to ship by Kodak, no contracts were formed until Kodak shipped the merchandise ordered, Cal.Com.Code Sec. 2206(1)(b), and, therefore, there could be no late delivery. Foremost's argument that Kodak somehow promised to ship the merchandise by logging the purchase orders as "received" is without merit; this alone did not manifest Kodak's acceptance of Foremost's offer of purchase. See Restatement (Second) of Contracts Sec. 19(2) (1981).

Foremost also argues that Cal.Com.Code Sec. 2204(1) (West 1964) applies to these claims, as there was "conduct by both parties which recognizes the existence of such a contract." While it is true that section 2204(1) permits a court to find an enforceable contract in the absence of a written agreement, the agreement-making conduct identified by Foremost is that "the equipment was actually shipped and sold by Kodak." If this statute applied, there could be no contracts formed until Kodak shipped the merchandise. Obviously, Foremost could have no claim for late delivery based upon a failure to deliver the goods before the contracts were formed.

Foremost's fifth and last contract claim...