L.A. Draper & Son v. Wheelabrator-Frye, Inc.
| Decision Date | 29 June 1984 |
| Docket Number | No. 83-7242,WHEELABRATOR-FRY,INC,83-7242 |
| Citation | 735 F.2d 414 |
| Parties | , 1984-2 Trade Cases 66,084 L.A. DRAPER & SON, Plaintiff-Appellant, v., a corporation; Hessco Industrial Supply, Inc., a corporation; Fred Z. Hester, an individual, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Bradley, Arant, Rose & White, Thad G. Long, Joseph B. Mays, Jr., Jere F. White, Jr., Birmingham, Ala., for plaintiff-appellant.
Cabaniss, Johnston, Gardner, Dumas & Oneal, L. Murray Alley, L. Vastine Stabler, Jr., Lee E. Bains, Jr., Birmingham, Ala., for Wheelabrator-Frye and Hessco.
Ralph Gaines, Talladega, Ala., for Hester.
Appeal from the United States District Court for the Northern District of Alabama.
Before JOHNSON and ANDERSON, Circuit Judges, and TUTTLE, Senior Judge.
L.A. Draper & Sons, Inc. 1 (plaintiff in the action below) appeals a directed verdict on its antitrust claim against defendants, Wheelabrator-Frye, Inc. (referred to as "Whiffy") 2, Hessco Industrial Supply, Inc. ("Hessco"), and Fred Hester 3, and the The antitrust claim under Section 1 of the Sherman Act involves a cause of action similar to that discussed in Northwest Power Products, Inc. v. Omark Industries, Inc., 576 F.2d 83 (5th Cir.1978), cert. denied, 440 U.S. 911 (1979), and Associated Radio Service Co. v. Page Airways, Inc., 624 F.2d 1342 (5th Cir.1980), cert. denied, 450 U.S. 1030, 101 S.Ct. 1740, 68 L.Ed.2d 226 (1981). Under the principles discussed in Northwest and Page, a plaintiff establishes an antitrust violation by proving that defendants conspired to use unfair and predatory competitive means to eliminate the plaintiff as a competitor, and that the plaintiff's elimination from the marketplace in this fashion imposed an illegal restraint on trade under the rule of reason analysis. Finding the plaintiff's proof in the instant case insufficient to state a claim under Northwest and Page, we affirm the district court's directed verdict on the plaintiff's antitrust claims.
dismissal without prejudice of its pendent state unfair competition claims.
With regard to the district court's decision to dismiss the pendent state claims without prejudice, 560 F.Supp. 1138, we remand for a determination of Ladsco's ability to bring those claims in state court. If a state forum is still available for the unfair competition claims, we hold that the district court's dismissal was not an abuse of discretion. If not, we hold that the district court must entertain Ladsco's state claims.
L.A. Draper & Sons, Inc., consists of two divisions, Ladmet and Ladsco, and is wholly owned by its president, Alan Draper. The plaintiff's Ladsco Division has been in the foundry supply business since the early 1950's. In 1979, when this cause of action arose, Ladsco distributed four products: (1) primary and secondary aluminum, (2) refractories, (3) grinding wheels, and (4) abrasive shot. 4 Since 1960 Ladsco has been obtaining that shot exclusively from the corporate defendant, Wheelabrator-Frye. In 1979 it obtained primary aluminum from Alcoa, secondary aluminum from the Ladmet Division of L.A. Draper & Sons, refractories from A.P. Green Refractories, and grinding wheels from Universal Grinding Wheels.
In 1979, the Ladsco Division of L.A. Draper & Sons had for many years been managed by the defendant, Fred Hester, who started with Ladsco in the early 1960's as a clerk typist and worked his way up through the ranks. By the early 1970's, Hester had become a vice president and director of Ladsco and was in charge of its For some reason, Hester became dissatisfied with his Ladsco employment arrangement. During the summer of 1979 he formed plans to terminate his employment and enter into business in competition with Ladsco. To this end, he purchased a warehouse in Anniston, Alabama, the corporate home of Ladsco, and began obtaining equipment and setting up the warehouse for the foundry supply business. Within a short time, Ned Landers, Jerry Ellis, and Bill West, three of Ladsco's salesmen, had invested in Hester's new venture and made plans to join Hester once the business was started.
day-to-day operations. Ladsco employed five salesmen under Hester's supervision, a warehouse supervisor, and numerous drivers and office personnel.
By the beginning of August, Hester had informed Ladsco's suppliers of his intent to leave Ladsco and begin a competing business. On July 31 and August 1, 1979, Hester had discussions with Wheelabrator-Frye officials, including the defendant O'Callahan, at Whiffy's offices in Mishawaka, Indiana. Wheelabrator-Frye immediately began to study the Ladsco-Hester situation.
On Thursday, August 23, 1979, Hester resigned. The following Monday, Mr. Draper presented most of the remaining Ladsco employees with an employment contract that included a covenant not to compete, in an effort to determine their continuing loyalty to Ladsco. None of the employees were willing to sign the contract; all were terminated. 5 Within three weeks all but one of the former Ladsco employees had begun to work for Hester's new company in competition with Ladsco. 6
By the second week of September 1979, Hester's new business, under the name of Hessco, had begun to take orders. Its product lines and suppliers were virtually a mirror image of those Ladsco had offered until two weeks earlier. 7 Mr. Draper, now operating Ladsco himself with a vastly depleted workforce was told by Whiffy that Ladsco no longer had credit to purchase Whiffy shot, but could continue to receive a commission for arranging direct sales to Ladsco customers.
On September 5, Mr. O'Callahan traveled to Anniston and on behalf of Whiffy expressed an interest in purchasing both Ladsco, from Mr. Draper, and Hessco, from Mr. Hester. Hester accepted the offer and on September 20, 1979, Hessco became a wholly-owned subsidiary of Wheelabrator-Frye.
Hessco rapidly became a substantial force in the foundry supply business. It established warehouses in Anniston, Birmingham, and Chattanooga, all cities in which Ladsco maintained warehouse facilities. There is some evidence in the record that Hessco reduced its shot prices in the early months of operation to gain a stronger foothold in the marketplace. Unlike Ladsco, Hessco did not operate in the Carolinas, where Ladsco and Whiffy had for many years been in direct competition for shot sales.
Ladsco, on the other hand, suffered an immediate downturn in its business fortunes. It obtained shot, refractories, and grinding wheels from alternative manufacturers and continued to market foundry supplies in competition with its former employees. Although some customers remained with Ladsco, many customers shifted over to Hessco and its familiar salesmen Based on the foregoing, in the summer of 1980 Ladsco filed suit alleging that Hester and other employees had conspired to use unfair competitive means to eliminate Ladsco from the marketplace. Ladsco further alleged that Whiffy had joined in the conspiracy in an effort to reap the profits that Hessco had attained through its unfair competitive practices. According to Ladsco, the defendant's actions violated Sec. 1 of the Sherman Act and state laws against unfair competition.
and products. By the end of 1980, Hessco business reports stated that "Ladsco is selling very little shot."
After extensive discovery, a jury trial began on March 15, 1982, in the United States District Court for the Northern District of Alabama. After thirteen days of testimony, Ladsco rested. The district court considered motions for directed verdict by Hessco, Hester, and Whiffy on both the antitrust and unfair competition claims. On April 1, the court heard a full day of legal arguments by the parties and announced its intention to file an order granting the directed verdict motions regarding the antitrust claims and dismissing the pendent state claims because they presented novel questions of Alabama law. The jury was dismissed. To allow the plaintiff an opportunity to file a separate state action on the unfair competition claims, the court proposed to delay in filing its order until April 9, 1982.
The court did not enter its order on April 9, 1982. Rather, for over six months the parties disputed the content of that order and Ladsco filed a motion for a new trial. On March 8, 1983, the district court had yet to issue its order and Ladsco filed a petition for mandamus. Eight days later the district court entered its order, L.A. Draper & Son, Inc. v. Wheelabrator-Frye, Inc., 560 F.Supp. 1138 (N.D.Ala.1983), and Ladsco filed timely notice of appeal. 8
Ladsco presents two primary issues 9 on this appeal: (1) whether the district court properly directed a verdict in favor of the defendants on the antitrust claim, and (2) whether the district court properly dismissed the pendent state unfair competition claims.
With regard to the first issue, the standards for evaluating motions for directed verdict were clearly articulated in Boeing v. Shipman, 411 F.2d 365 (5th Cir.1969) (en banc). 10
On motions for directed verdict and for judgment notwithstanding the verdict the Court should consider all of the evidence--not just that evidence which supports the non-mover's case--but in the light and with all reasonable inferences most favorable to the party opposed to the motion. If the facts and inferences point so strongly and overwhelmingly in favor of one party that the Court believes that reasonable men could not arrive at a contrary verdict, granting of the motions is proper. On the other hand, if there is substantial evidence opposed to the motions, that is, evidence of such quality and weight that reasonable and Id. at 374-75 (footnote omitted). See also Huff v. Standard Life Ins. Co., 683 F.2d 1363, 1366 (11th Cir.1982); Kaye v. Pawnee Const. Co., 680 F.2d 1360, 1364 (11th Cir.1982); Malcolm v. Marathon Oil Co....
To continue reading
Request your trial
-
Smith v. Dunn
...claim and the federal and state claims must derive from a ‘common nucleus of operative fact.’’ " L.A. Draper & Son v. Wheelabrator-Frye, Inc. , 735 F.2d 414, 427 (11th Cir. 1984) (citation omitted). The exercise of supplemental jurisdiction is discretionary. United Mine Workers of Am. v. Gi......
-
National Bancard Corp. (NaBanco) v. VISA U.S.A., Inc.
...S.Ct. 377, 71 L.Ed. 700 (1927); Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d 1486 (11th Cir.1985); L.A. Draper & Son v. Wheelabrator-Frye, Inc., 735 F.2d 414 (11th Cir.1984); Construction Aggregate Transport, Inc. v. Florida Rock Inds., Inc., 710 F.2d 752 (11th Cir.1983); Joe Regueir......
-
Storer Cable Communications v. MONTGOMERY, ALA.
...113 S.Ct. 1285, 122 L.Ed.2d 677 (1993); T. Harris Young & Assoc., Inc. v. Marquette Elec., 931 F.2d 816, 824 (11th Cir.1991); L.A. Draper & Son, 735 F.2d at 423. The boundaries of a submarket are determined by a number of factors. These include: industry or public recognition of the submark......
-
ET Barwick Industries v. Walter E. Heller & Co.
...rests on a determination of available substitutes." Rothery Storage & Van Co., 792 F.2d at 218; see L.A. Draper & Son v. Wheelabrator-Frye, Inc., 735 F.2d 414, 423 (11th Cir.1984). Within certain product markets, there may exist economically significant sub-markets which themselves constitu......
-
The Evolving Role of Business Torts in Antitrust Litigation
...does not amount to per se violation[,] and no rule of reason claim has been established”); L.A. Draper & Son v. Wheelabrator-Frye, Inc., 735 F.2d 414, 421 & n.11 (11th Cir. 1984) (while unfair competitive means can be actionable under other legal theories, “to avail itself of treble damages......