Helicopter Support Systems v. Hughes Helicopter

• Decision Date: 12 June 1987
• Docket Number: No. 85-3938.,85-3938.
• Citation: 818 F.2d 1530
• Parties: HELICOPTER SUPPORT SYSTEMS, INC., Plaintiff-Appellant, George W. Hurd, et al., Plaintiffs, v. HUGHES HELICOPTER, INC., Defendant-Appellee, George W. Hurd, et al., Defendants, Helicopter Leasing Services, Inc., and Charles W. Brammer, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

818 F.2d 1530

HELICOPTER SUPPORT SYSTEMS, INC., Plaintiff-Appellant George W. Hurd, et al., Plaintiffs, v. HUGHES HELICOPTER, INC., Defendant-Appellee George W. Hurd, et al., Defendants Helicopter Leasing Services, Inc., and Charles W. Brammer, Defendants-Appellees.

No. 85-3938.

United States Court of Appeals, Eleventh Circuit.

June 12, 1987.

H. Kenneth Kudon, Washington, D.C., for plaintiff-appellant.

Steven D. Merryday, Glenn, Rasmussen, Fogarty, Merryday & Russo, Tampa, Fla., for defendant-appellee.

Before ANDERSON and CLARK, Circuit Judges, and SIMPSON^*, Senior Circuit Judge.

ANDERSON, Circuit Judge:

Helicopter Support Systems, Inc. ("HSS") appeals from the district court's order granting summary judgment to appellee Hughes Helicopter, Inc. ("Hughes"). Because we find that HSS has adduced evidence which tends to exclude the possibility that Hughes was acting independently, we reverse.

I. BACKGROUND

Hughes is an international manufacturer of helicopters, helicopter parts and related items. These products are distributed through service centers and distributors in the United States and overseas. HSS, located in Florida, was a franchised Hughes service center from September 1978 through April 1983.

As part of its operation, HSS advertised parts sales and support services for Hughes helicopters throughout the world. Frequently, such advertisements offered a significant discount on Hughes parts. HSS was successful with such advertising, and overseas sales became a significant portion of HSS' business.

HSS' distributorship for Hughes was ultimately terminated. HSS contends that this termination was pursuant to a resale price support agreement between Hughes and its international distributors. In other words, HSS argues that it was terminated because it undersold other Hughes distributors in the sale of Hughes parts overseas. As evidence of this price support agreement, HSS points to various communications between Hughes and its international distributors, and to Hughes' international distributorship agreement which, allegedly, provides for a resale price fixing arrangement.

Hughes, of course, tells a different story. According to Hughes, HSS was terminated because it provided inadequate service to local Florida customers. In support of its contention, Hughes adduced evidence to show that HSS moved its repair facility to a more distant location, failed to employ a Hughes qualified mechanic, and had difficult business relations with local law enforcement officials who were major Hughes customers.

Following its termination, HSS brought suit in district court. HSS alleged that Hughes was involved in a price fixing conspiracy with its overseas distributors in violation of § 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. The district court granted summary judgment to Hughes.¹ This appeal ensued.

II. DISCUSSION

Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, proscribes "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 nations." Because of the unusual nature of § 1 antitrust violations which involve an allegation that a manufacturer has acted in concert with the distributors of its product in order to fix illegally a resale price, the Supreme Court has recently crafted a revised standard of proof for such cases. This case presents the first opportunity for this circuit to apply that standard.²

A. Summary Judgment Standard

Generally an order granting summary judgment may be entered only when the moving party has met the burden of demonstrating the absence of a genuine issue of material fact, viewing the evidence in the light most favorable to the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Morrison v. Washington County, 700 F.2d 678, 682 (11th Cir.), cert. denied, 464 U.S. 864, 104 S.Ct. 195, 78 L.Ed.2d 171 (1983). All reasonable doubts regarding the facts should be resolved in favor of the non-moving party. Moreover, a court must deny summary judgment if reasonable minds could differ as to the factual inferences to be drawn from the undisputed facts.

Two recent Supreme Court cases, however, modify this general summary judgment standard for antitrust violations arising out of allegations that a distributor was terminated because it failed to adhere to an illegal resale price agreement.

In Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984), the Court reviewed a manufacturer's termination of a price-cutting distributor after the manufacturer had received complaints from another distributor. The Court held that these complaints were not, standing alone, sufficient to create a jury question as to whether the manufacturer and the distributor had agreed to an illegal resale price support mechanism. This standard might seem to fly in the face of the general rule of Adickes, since it is at least arguable that a jury might reasonably infer such an agreement from the existence of complaints by a distributor and a manufacturer's response to those complaints by terminating the offending distributor.

The ruling in Monsanto is understandable in light of the distinction between permissible independent or unilateral conduct and impermissible concerted action. Under United States v. Colgate & Co., 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992 (1919), it is permissible for a manufacturer to announce retail prices in advance and terminate all distributors who fail to comply. Thus, a manufacturer's termination of a price-cutting distributor after receiving a complaint from another distributor is lawful under Colgate if it is the product of an independent determination that the price-cutting distributor undermined the manufacturer's legitimate marketing plans.

By contrast, in Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 31 S.Ct. 376, 55 L.Ed. 502 (1911), the Supreme Court held that it was impermissible for a manufacturer and its distributors to agree on the price at which distributors would resell goods.³ Monsanto holds, however, that in order to establish liability under the doctrine of Dr. Miles, more evidence is needed of impermissible behavior than a mere response to distributor complaints. Such a response is equally consistent with the distributor's permissible exercise of its rights under Colgate. The Court thus declined to adopt an evidentiary rule which would extensively deter permissible, economically advantageous conduct.

Consequently, Monsanto requires that, in order to avoid summary judgment, "there must be evidence that tends to exclude the possibility that the manufacturer and nonterminated distributors were acting independently." 104 S.Ct. at 1471. Such evidence will exist if the manufacturer seeks agreement from its distributor to conform to a resale price and if the distributor communicates in some way its acquiesence in that agreement. Id. at 1471 n. 9. In short, Monsanto establishes that conduct which is as equally consistent with permissible competition as it is with an illegal conspiracy does not, without more, support even an inference of conspiracy. Id. at 1470. If other evidence of a conspiracy is not available then the plaintiff has failed to prove an essential element of an antitrust case and summary judgment against him is proper. Cf. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

Subsequent to Monsanto, the Supreme Court decided Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Matsushita added a gloss to the Monsanto test which is also relevant here. American electronics manufacturers alleged that their Japanese competitors had conspired to monopolize the American markets through predatory pricing below market level. The Supreme Court reversed the Third Circuit's denial of a motion for summary judgment, reasoning that "the factual context renders the American companies' claim an implausible ... one that simply makes no economic sense." 106 S.Ct. at 1356. Thus, the Court held that a non-moving party who seeks to defeat a summary judgment motion "must show that the inference of conspiracy is reasonable in light of the competing inferences of independent action or collusive action that could not have harmed" them. Id. at 1357. If the alleged conspiracy is economically irrational and practically infeasible, then summary judgment should be granted. Following this test the Supreme Court determined that the twenty-year price-cutting conspiracy in the United States allegedly conducted by Japanese electronics manufacturers was economically infeasible. Hence, the American manufacturers' antitrust claim could not survive a summary judgment motion.

We discern from these cases a two-step test which an antitrust plaintiff must survive in order to avoid summary judgment when he alleges a conspiracy that arises out of a collusive price-fixing agreement between a manufacturer and its distributors. First, the plaintiff must satisfy the court that the conspiracy which he alleges is, objectively, an economically reasonable one. Matsushita dictates that if the alleged conspiracy is economically infeasible or irrational then, as a matter of law, summary judgment must be entered against the plaintiff. Second, the plaintiff in a distributor-termination case must also be able to point to evidence which tends to exclude the possibility that the manufacturer was operating independently in making his determination to terminate the distributor. Mere complaints from other competing distributors are not sufficient in this regard since they are equally consistent with both an independent and a collusive interpretation. The distributor must, instead, adduce positive evidence which tends to exclude the possibility of unilateral action.⁴

B. Application of the Standard

Though we have defined a...