Industrial Burner Systems, Inc. v. Maxon Corp.

• Decision Date: 04 August 2003
• Docket Number: No. CIV. 02-73127.,CIV. 02-73127.
• Citation: 275 F.Supp.2d 878
• Parties: INDUSTRIAL BURNER SYSTEMS, INC., A Michigan Corporation, Plaintiff, v. MAXON CORPORATION, An Indiana Corporation, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

Page 878

275 F.Supp.2d 878

INDUSTRIAL BURNER SYSTEMS, INC., A Michigan Corporation, Plaintiff, v. MAXON CORPORATION, An Indiana Corporation, Defendant.

No. CIV. 02-73127.

United States District Court, E.D. Michigan, Southern Division.

August 4, 2003.

Kelly A. Kruse, Norbert B. Leonard, Bloomfield Hills, for plaintiff.

Fredric A. Smith, Michael J. Brady, Andrew B. Dzeguze, Southfield, Barnes & Thornburg, Indianapolis, IN, for defendant.

MEMORANDUM OPINION AND ORDER

ANNA DIGGS TAYLOR, District Judge.

I.

Maxon Corporation ("Maxon") designs and manufactures a range of products for use in combustion and gas regulation systems. These include burner assemblies ("burners"), a wide variety of valves¹ (safety shut off. micro-ratio and control), and pipe or gas trains (sequences of pipe, valves, regulators, meters and other equipment through which natural gas is supplied — from a gas line to a burner, burner assembly or other industrial application). Their products are offered to various customers, including firms in the automotive industry.

Industrial Burner Systems ("IBS") supplies, designs and services parts and equipment for use in combustion and gas regulation systems. At least one company, Eclipse Products ("Esclipse"), which IBS serves as a manufacturer's representative for, designs and manufactures industrial burners.² Approximately 70% of IBS' business is derived from the sale of gas trains, with the residual coming from the sale of parts for gas trains. 85% of its gas trains are sold for use in automotive industry applications.³ IBS purchases Maxon parts to be used as components in its gas trains.

Since 1974, Maxon has had a policy of offering various prices to customers "based on the nature of their operations." See Maxon's Motion for Summary Judgment, at 2. There is one price for burners and another for valves and gas trains (these prices are usually expressed by a pair of numbers — the first for burners, the second for valves). The price at which each product is offered is based upon a classification assigned by Maxon to the purchaser. The immediately relevant classifications for burners are: List, Resaler and Original Equipment Manufacturer ("OEM"). There are two relevant classifications for valves: Wholesaler and OEM. Any purchaser of valves or burners qualifying for OEM status, "based on the nature of their business,"⁴ is given the benefit of a substantial price reduction. IBS alleges that all of its competitors in the automotive industry gas train market have been given OEM status, while it has been specifically denied the OEM classification.⁵ The record indicates that IBS was classified as a Resaler (for burners) and a Wholesaler (for valves). Therefore, whenever IBS purchased burners or valves from Maxon it paid more than it would have had it been listed as an OEM. Maxon also provides discounts for parties who agree to blanket purchase orders at set volumes at the start of a year ("BOD").⁶ Additionally, individual orders of sufficient size are eligible for volume discounts.

The specific market structure at issue has three relevant levels. First, the component parts manufacturing level (primary-line), where Maxon and Eclipse design and manufacture, and Maxon sells, burners and valves.⁷ Second, the gas train manufacturing level (secondary-line), where IBS, Maxon and the other gas train manufacturers ("Competitors") assemble parts from the primary-line into gas trains that are then offered to customers.⁸ Finally, the customer level (tertiary-line), where companies, such as tier-1 auto suppliers, purchase the finished gas trains.

Transactions reaching the tertiary-line follow a specific process. First, the tertiary-line customer solicits bids for gas trains from the secondary-line companies. Second, secondary-line companies get quotes on valves and burners from the primary-line before calculating their bids. Third, with primary-line quotes in hand, the secondary-line companies then submit their competitive bids to the tertiary-line. Thus, even though a purchase may appear prospective in nature, it is for the purpose of the market for the bid, actual in fact.⁹ Fourth, the tertiary-line customer then chooses the lowest bid (the amount of which is inclusive of the already-determined price for the primary-line parts).¹⁰ Finally, once the bid is secured, the secondary-line company retrieves the parts from the primary-line at the pre-established price.

In July 2002, IBS brought the present suit. The claim is an allegation of price discrimination under the Robinson-Patman Act, 15 U.S.C. § 13(a), seeking treble damages. Subsequent to the filing of this suit, Maxon completely terminated its relationship with IBS. IBS sought a preliminary injunction to compel Maxon to continue honoring purchase orders submitted to Maxon, but was denied. Ross Flora, the President of IBS, indicated that IBS had been able to obtain an alternative source for Maxon products, but at a higher price than those previously paid by IBS to Maxon.¹¹ IBS is pursuing a claim for "lost profits," based on the theory that IBS had lost various jobs for gas trains over the years because of bid prices.

Maxon has now moved for summary judgment under Fed.R.Civ.P. 56(c).

II.

Although both the Supreme Court and this circuit have emphasized that Rule 56 makes absolutely no distinction between antitrust and other cases, see First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 288-90, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968); Daily Press, Inc. v. United Press International, 412 F.2d 126, 128 (6th Cir.), cert. denied, 396 U.S. 990, 90 S.Ct. 480, 24 L.Ed.2d 453 (1969), both of these courts have repeatedly indicated that summary judgment should be used sparingly in complex antitrust litigation. See Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962); Bouldis v. U.S. Suzuki Motor Corp., 711 F.2d 1319, 1324 (6th Cir.1983); Smith v. Northern Michigan Hospitals, Inc., 703 F.2d 942, 947 (6th Cir.1983).

III.

Section 2(a) of the Robinson-Patman Act provides, in pertinent part, as follows:

It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality . . . where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them.

15 U.S.C. § 13(a).

Price discrimination claims generally fall into three categories. See George Haug Co. v. Rolls Royce Motor Cars, Inc., 148 F.3d 136, 141, n. 2 (2d Cir.1998); Best Brands Beverage, Inc. v. Falstaff Brewing Corp., 842 F.2d 578, n. 1 (2d Cir.1987). The first, primary-line price discrimination, occurs when a seller's price discrimination harms competition with the seller's competitors. See, e.g., Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993). The next, secondary-line price discrimination, occurs when a seller's discrimination impacts competition among the seller's customers; i.e. the favored purchasers and disfavored purchasers. See, e.g., Texaco, Inc. v. Hasbrouck, 496 U.S. 543, 558 n. 15, 110 S.Ct. 2535, 110 L.Ed.2d 492 (1990); F.T.C. v. Sun Oil Co., 371 U.S. 505, 83 S.Ct. 358, 9 L.Ed.2d 466 (1963). The third, tertiary-line violation, occurs when the seller's price discrimination harms competition between customers of the favored and disfavored purchasers, even though the favored and disfavored purchasers do not compete directly against another. See, e.g., Falls City Industries, Inc. v. Vanco Beverage, Inc., 460 U.S. 428, 436, 103 S.Ct. 1282, 75 L.Ed.2d 174 (1983). Only the first two line-types may be at issue in the present case.¹²

To establish secondary-line price discrimination under section 2(a), a plaintiff has the burden of establishing four things: (1) that seller's sales were made in interstate commerce; (2) that the seller discriminated in price as between the two purchasers; (3) that the product or commodity sold to the competing purchasers was of the same grade and quality; and (4) that the price discrimination had a prohibited effect on competition. See Haug, 148 F.3d at 141; Hasbrouck, 496 U.S. at 556, 110 S.Ct. 2535. Finally, in the case of a private plaintiff who has proved a violation of section 2(a), that plaintiff must, in order to recover damages under § 4 of the Clayton Act, demonstrate a fifth element: that it suffered actual injury to its business or property as a result of the price discrimination. Id. at 141 (citing J. Truett Payne, Co. v. Chrysler Motors Corp., 451 U.S. 557, 562, 101 S.Ct. 1923, 68 L.Ed.2d 442 (1981)).¹³

Maxon has not argued that the sales in question were not made in interstate commerce, that the products sold to IBS and its competitors were not of "like grade and quality" or whether there was, in fact, a "price discrimination."¹⁴ Instead, Maxon asserts that: (1) because there were never two "contemporaneous" purchases, there could never be discrimination within the meaning of the Robinson-Patman Act; and, (2) because of the market structure inherent in competitive bidding, there could, as a matter of law, be no "competitive injury." Next, Maxon avers that IBS is unable to prove antitrust injury, i.e., a present injury that is actually traceable to the benefits conferred upon the favored competitor. Finally, a statute of limitations defense is made.

Comemporaneous

Section 2(a) of the Robinson-Patman Act "requires that each purchaser be given an `equal opportunity' by the seller to receive the benefit of higher or lower prices." Haug, 148 F.3d at 140. Maxon argues that this "equal opportunity" requirement of Robinson-Patman cannot be satisfied absent a...