Jones v. Borden Company

• Decision Date: 15 July 1970
• Docket Number: No. 28278.,28278.
• Citation: 430 F.2d 568
• Parties: Tilden A. JONES, Plaintiff-Appellant, v. The BORDEN COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

430 F.2d 568 (1970)

Tilden A. JONES, Plaintiff-Appellant, v. The BORDEN COMPANY, Defendant-Appellee.

No. 28278.

United States Court of Appeals, Fifth Circuit.

July 15, 1970.

W. R. Barnes, James M. O'Leary, Jr., Shafer, Gilliland, Davis, Bunton & McCollum, Odessa, Tex., for appellant.

F. H. Pannill, W. B. Browder, Jr., Midland, Tex., H. Blair White, J. A. Greaves, W. N. Braun, Chicago, Ill., for appellee; Stubbeman, McRae, Sealy & McLaughlin, Midland, Tex., Sidley & Austin, Chicago, Ill., of counsel.

Before WISDOM, GOLDBERG and INGRAHAM, Circuit Judges.

WISDOM, Circuit Judge:

Summary judgments in antitrust cases often are unadvisable. White Motor Company v. United States, 1963, 372 U. S. 253, 259, 83 S.Ct. 696, 700, 9 L.Ed.2d 738, 744. But in this treble damage action for price discrimination and exclusive dealing arrangements under the Robinson-Patman Act, the Borden Company has established by deposition and affidavit the nonexistence of exclusive dealing arrangements and the § 2(b) defense of meeting competition in good faith to the price discrimination charge. The plaintiff has not responded with affidavits and depositions or taken other steps to create any "genuine issue as to any material fact", Rule 56(c), Fed.R. Civ.P., and the record reveals no such issues. "When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him." Rule 56(e), Fed.R.Civ.P.

I.

Tilden A. Jones bought a milk distributing business in Odessa, Texas, September 25, 1967. In this business he purchased milk products from Metzger Dairies and distributed and sold them to retailers. During 1967-68 eight dairies sold milk products in the Odessa area. In addition, two groups of stores — Safeway and 7-Eleven — had their own plants. But Jones's main competition was Borden, serving Odessa from its Midland plant through company-owned routes rather than a distributorship. The chief products in this market were homogenized milk and low-fat or "2% milk", both sold by the half-gallon. The market was known as a "twenty percent market" — that is, the grocer generally received as his profit a twenty percent discount from the retail price.

These dairy products are distributed at a small profit per item. A distributor therefore must maintain a large volume of business to succeed. The amount of display space a grocer allows the distributor is of great importance because consumers tend to purchase the brand with the largest display.

Jones alleges that Borden paid discriminatory discounts or rebates to five main groups of retail outlets in Odessa and that it discriminatorily charged a lower price to one group of retail outlets by selling it a private label milk. As a result, these grocers allegedly enlarged Borden's display space at Jones's expense. Furthermore, Jones alleges that Borden sold milk to two groups of stores on the condition that they not deal in Metzger products.

By May 2, 1968, Jones's business was failing. He turned the distributorship over to one of its previous owners who operated it for a month longer, then finally shut it down completely.¹ Now Jones seeks treble damages for the loss of sales and the loss of his investment in the distributorship. He accuses Borden of violating the Clayton Act as amended by the Robinson-Patman Act, 15 U.S.C. § 13 (a) & (c).²

Borden responds that its discounting activities had no adverse effect on competition,³ did not cause Jones's injury,⁴ and, in any event, were protected by the § 2(b) defense that

nothing herein contained shall prevent a seller rebutting the prima-facie case of price discrimination thus made by showing that his lower price * * * to any purchaser or purchasers was made in good faith to meet an equally low price of a competitor, or the services or facilities furnished by a competitor.

15 U.S.C. § 13(b). The exclusive dealing arrangements Borden denies outright.

On all these grounds, after the taking of depositions and the filing of affidavits, the district court granted Borden's motion for summary judgment. We agree with the district court that there is no "genuine issue as to any material fact" establishing the absence of exclusive dealing arrangements. Since we also find no "genuine issue as to any material fact" establishing the § 2(b) defense, we affirm the judgment without reaching the other issues whether Borden's activities had any substantial anti-competitive or monopolistic effect and whether Jones's injuries were caused by Borden or by Metzger's and his predecessor's activities.

II.

A. Exclusive Dealing Arrangements.

Jones's contention, as taken from his brief on appeal, is as follows:

Prior to September 25, 1967, Borden loaned money to the owners of several retail stores in Ector County including three Tradeway stores. Payments were still being made on the debt when depositions were taken in the case. In February of 1968 appellant Jones solicited the owner of the Tradeway stores to permit him to display and sell Metzger dairy products in the Tradeway stores and he was refused permission.

In June of 1967 Borden commenced selling their products to Gibson\'s, a large discount store in Ector County. Gandy\'s milk had been in the Gibson\'s store up until the time Borden took over. Borden gave Gibson\'s a 5% rebate in addition to the 20% that was in the market and went into the store to the exclusion of all other brands of milk. The excuse given by appellee granting Gibson\'s the 5% rebate in addition to the 20% discount was that Gandy milk had furnished the dairy department equipment to Gibson\'s while it was in the Gibson\'s store and, since Gibson\'s was installing its own dairy equipment at the time Borden took over, the 5% rebate was allowed as the equivalent to furnishing the dairy equipment. In the latter part of February of 1968 appellant solicited the management of Gibson\'s to display and sell Metzger dairy products in the Gibson\'s store and permission was denied.

1 Such an exclusive arrangement could involve both a violation of Section 2(a) and Section 2(c) of the Clayton Act as amended by the Robinson-Patman Act. * * *

Thus, Jones has abandoned on appeal his original contention that these were exclusive dealing arrangements in violation of 15 U.S.C. § 14. This abandonment is understandable, for the uncontested affidavits of the Borden representative and the Tradeway manager explicitly deny the existence of an exclusive dealing arrangement. The Tradeway manager stated that Tradeway handled only Borden milk because Tradeway had only limited display space and Borden had good customer acceptance. Jones himself acknowledged that the Tradeway manager had told him nothing of any such arrangement but had said only that he was happy with Borden and would talk to Jones "if the situation warranted a change". There is no other evidence.

Similarly, with regard to Gibson, the Borden representative and the Gibson owner have stated unequivocally the absence of an exclusive dealing arrangement. Again, no evidence contradicts this position. Jones admits that he was told nothing of such an arrangement. When he talked to the owner about servicing the store, the owner told him to see the grocery manager. The grocery manager told Jones to see the owner. Therefore, Jones ceased trying to sell milk to Gibson's, concluding that he "was getting the run-around".

What Jones does contend now is that Borden violated § 2(a) and (c) of the Robinson-Patman Act. Section 2(a), prohibiting price discrimination, is subject to the § 2(b) defense of meeting competition. We discuss Borden's defenses under this section in the next part of this opinion. Section 2(c) prohibits the paying or granting of "anything of value as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof". It is very difficult to see how the arrangements here could fit into the pseudo-brokerage or even commercial bribery arrangements that Congress sought to curtail through § 2(c). Rangen, Inc. v. Sterling Nelson & Sons, 9 Cir. 1965, 351 F.2d 851, 856. At any rate, the uncontested affidavits that no such arrangements existed sustain the grant of summary judgment in this respect.

B. The § 2(b) Defense.

Jones argues that Borden's § 2(b) defense does not justify summary judgment because "justification by and the good faith of the appellee in its actions is but a question of fact". The statement is unobjectionable but it does not prove that summary judgment was incorrectly granted. It is true that Borden has the burden of making out its § 2(b) defense. But it succeeds in establishing the facts to make out the defense, then § 2(b) "affords an absolute defense to a charge of violating § 2(a), notwithstanding the existence of the statutorily prohibited anticompetitive effect". FTC v. Sun Oil Company, 1963, 371 U.S. 505, 514, 83 S.Ct. 358, 9 L.Ed.2d 466, 475. Thus, the question we must resolve is whether there are any "genuine issues as to the material facts" which Borden must develop to sustain its defense.

According to the Supreme Court,

Section 2(b) does not require the seller to justify price discriminations by showing that in fact they met a competitive price. But it does place on the seller the burden of showing that the price was made in good faith to meet a competitor\'s. The good faith of the discrimination must be shown in the face of the fact that the seller is aware that his discrimination is unlawful, unless good faith is shown, and in circumstances, which are peculiarly favorable to price discrimination abuses. We agree with the Commission that the statute at least requires the seller, who has knowingly discriminated in price, to

...