Friendship Materials, Inc. v. Michigan Brick, Inc., 80-1018

• Citation: 679 F.2d 100
• Decision Date: 26 May 1982
• Docket Number: No. 80-1018,80-1018
• Parties: 1982-2 Trade Cases 64,756 FRIENDSHIP MATERIALS, INC., Plaintiff-Appellee, v. MICHIGAN BRICK, INC., Cadillac Brick Co., and Century Brick Co., Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 100

679 F.2d 100

1982-2 Trade Cases 64,756

FRIENDSHIP MATERIALS, INC., Plaintiff-Appellee, v. MICHIGAN BRICK, INC., Cadillac Brick Co., and Century Brick

Co., Defendants-Appellants.

No. 80-1018.

United States Court of Appeals, Sixth Circuit.

Argued June 1, 1981.

Decided May 26, 1982.

Gregory L. Curtner, Detroit, Mich., for defendants-appellants.

Robert V. Seymour, Southfield, Mich., for plaintiff-appellee.

Before ENGEL and JONES, Circuit Judges, and WEICK, ^* Senior Circuit Judge.

ENGEL, Circuit Judge.

The defendant Michigan Brick, Inc. ("Michigan Brick") appeals the order of the district court granting a preliminary injunction in this antitrust case. The plaintiff is Friendship Materials, Inc. ("Friendship"), a Detroit area firm which sells building materials and supplies to the construction industry. Michigan Brick manufactures a particular kind of clay brick known as face brick and sells it to dealers in southeastern Michigan as well as to dealers in Canada and other parts of the United States. Face brick is popular in residential and commercial construction, and Michigan Brick is the only manufacturer of face brick in southeastern Michigan. The closest competing manufacturer of face brick is located in Ohio some 180 to 190 miles from Detroit.

Friendship's complaint alleged that Michigan Brick conspired with two of its Detroit area dealers, Cadillac Brick Co. ("Cadillac") and Century Brick Co. ("Century"), ¹ to prevent Friendship from obtaining face brick manufactured by Michigan Brick, and that this conspiracy amounted to an unreasonable restraint of trade violative of section 1 of the Sherman Act. ² The complaint also alleged a conspiracy among the defendants to monopolize and attempt to monopolize the distribution and sale of face brick in southeastern Michigan, in violation of section 2 of the Sherman Act. ³ Friendship demanded treble damages under 15 U.S.C. § 15 (1976), and preliminary and permanent injunctive relief under 15 U.S.C. § 26 (1976).

In 1977, Michigan Brick had seven dealers in the metropolitan Detroit area. These dealers sold approximately 12 million Michigan Brick face bricks in the Detroit market during that year. This amounted to approximately 30 percent of Michigan Brick's total production, and accounted for 10 to 20 percent of the total Detroit brick market. Cadillac is by far the largest Michigan Brick dealer, having accounted for approximately 80 percent of the Michigan Brick sales in Detroit in 1977. Friendship and Cadillac are direct competitors in selling face brick and other types of brick to builders and contractors in the Detroit metropolitan market. Michigan Brick has consistently refused to make Friendship one of its dealers or to sell its face brick directly to Friendship.

Beginning in 1975, Friendship was able to acquire Michigan face brick indirectly, purchasing the face brick from Century at a premium of $3.00 to $5.00 per thousand over the price which Michigan Brick charged its dealers. This enabled Friendship to compete with Cadillac and other Michigan Brick dealers in the sale of Michigan face brick. In late 1976, however, Friendship's indirect source of Michigan face brick was cut off by Century's refusal to continue selling the brick to it. Friendship was thereafter unable to obtain the brick, directly or indirectly. Friendship's antitrust claim under section 1 of the Sherman Act is that Cadillac and Michigan Brick successfully conspired to coerce Century from selling to Friendship.

After an extensive hearing, the district court concluded that Friendship had shown a substantial likelihood of ultimately proving both a vertical and horizontal conspiracy between the defendants to restrain trade:

The defendants have entered into an agreement which has deprived, and will continue to deprive, the plaintiff of its source of Michigan Face Bricks. The sole purpose of the agreement between them is to prevent the plaintiff from engaging in intra-brand price competition with Cadillac Brick Co. and perhaps with others....

Friendship Materials, Inc. v. Michigan Brick, Inc., Civ. No. 77-70542, Mem. Op. at 1 (E.D.Mich. April 25, 1979) (hereinafter "Memorandum Opinion").

Considering the entire evidence, it now appears with almost certainty that the decision of Century Brick Company ... to discontinue selling Michigan Face Brick to Friendship Materials, Inc. ... was a direct result of pressure from Michigan Brick, Inc. ... applied at the insistence of Cadillac Brick Co. ..., and that there was an implied agreement between Cadillac, Michigan Brick, and Century that Century would discontinue selling Michigan Face Brick to Friendship. The reasons given by Century for such action were pretextual.

Memorandum Opinion at 1 (Nov. 21, 1979). The district court held that these facts, if established, would amount to a per se violation of section 1 of the Sherman Act, and that Friendship had therefore demonstrated a substantial likelihood of ultimate success on its section 1 claim.

The district court did not expressly decide whether Friendship had demonstrated that it would suffer any irreparable injury in the absence of a preliminary injunction. Instead, the district court appears to have weighed the harm likely to be suffered by Friendship absent a preliminary injunction against the harm an injunction could cause to the defendants. According to the district court, this balance of harms favored the granting of an injunction:

As stated on the record, there is little, if any, credible evidence to support a conclusion that Friendship will be put out of business or even out of the brick business if it does not re-establish a source of supply of Michigan Face Brick during the pendency of this suit. The plaintiff's competitive position is damaged, however. It is difficult to conceive how the defendants can suffer any significant hardship by being restrained from the continuation of practices which violate the basic economic law of the land.

Memorandum Opinion at 2 (April 25, 1979). Consequently, the district court issued a preliminary injunction designed to prevent Michigan Brick from interfering in any way with the sale of Michigan face brick by one of its dealers to Friendship. The primary provision of the injunction is as follows:

1. Michigan Brick is restrained from discouraging or prohibiting any of its dealers in Michigan from selling Michigan Face Brick, and it is restrained from imposing or threatening to impose any sanctions against one of its dealers who elects to sell brick to Friendship.

Because the district court erred in issuing the preliminary injunction without making any findings of irreparable injury to Friendship absent the injunction, we vacate the preliminary injunction and remand.

I

Appellate review of a district court decision to grant or deny a preliminary injunction is, of course, limited to "a determination of whether the District Court abused its discretion." Mason County Medical Ass'n v. Knebel, 563 F.2d 256, 261 (6th Cir. 1977). In exercising its discretion to grant a preliminary injunction, however, the district court must consider four factors:

1) Whether the plaintiff has shown a strong or substantial likelihood or probability of success on the merits;

2) Whether the plaintiff has shown irreparable injury;

3) Whether the issuance of a preliminary injunction would cause substantial harm to others;

4) Whether the public interest would be served by issuing a preliminary injunction.

Id. Although these four factors guide the discretion of the district court, they do not establish a rigid and comprehensive test for determining the appropriateness of preliminary injunctive relief. "A fixed legal standard is not the essence of equity jurisprudence...." Roth v. Bank of the Commonwealth, 583 F.2d 527, 537 (6th Cir. 1978). Nevertheless, this court has never held that a preliminary injunction may be granted without any showing that the plaintiff would suffer irreparable injury without such relief. Despite the overall flexibility of the test for preliminary injunctive relief, and the discretion vested in the district court, equity has traditionally required such irreparable harm before an interlocutory injunction may be issued. See Rondeau v. Mosinee Paper Corp., 422 U.S. 49, 61, 64-65, 95 S.Ct. 2069, 2077, 2078-2079, 45 L.Ed.2d 12 (1975); Sampson v. Murray, 415 U.S. 61, 88, 94 S.Ct. 937, 951, 39 L.Ed.2d 166 (1974); Beacon Theatres v. Westover, 359 U.S. 500, 506-07, 79 S.Ct. 948, 954, 3 L.Ed.2d 988 (1959); E.E.O.C. v. Hocking Corp., 666 F.2d 1037, 1039 (6th Cir. Dec. 16, 1981); United States v. Spectro Foods Corp., 544 F.2d 1175, 1181 (3rd Cir. 1976); 11 Wright & Miller, Federal Practice and Procedure § 2948, pp. 430-441 (1973); see generally Leubsdorf, The Standard For Preliminary Injunctions, 91 Harv.L.Rev. 525, 527-37 (1978). In Sampson v. Murray, supra, the Supreme Court reversed the granting of a preliminary injunction, in part because the plaintiff had not made any showing of irreparable harm. The Court stated:

We believe that the Court of Appeals was quite wrong in suggesting that at this stage of the proceeding the District Court need not have concluded that there was actually irreparable injury. This Court has stated that "(t)he basis of injunctive relief in the federal courts has always been irreparable harm and inadequacy of legal remedies" .... Yet the record before us indicates that no witnesses were heard on the issue of irreparable injury, that respondent's complaint was not verified, and that the affidavit she submitted to the District Court did not touch in any way upon considerations relevant to irreparable injury.

415 U.S. at 88, 94 S.Ct. at 951 (citations omitted).

The requirement of irreparable harm to support the granting of a preliminary injunction applies to private antitrust actions in the same way it applies to equity actions in general. This is made clear, both implicitly and explicitly, by section 16 of the Clayton...