Landmark Development Corp. v. Chambers Corp., s. 83-6026
| Decision Date | 18 January 1985 |
| Docket Number | Nos. 83-6026,83-6032,s. 83-6026 |
| Parties | , 1985-1 Trade Cases 66,367 LANDMARK DEVELOPMENT CORPORATION, and Serv-Well Furniture Company, Inc., Plaintiffs-Appellants, v. CHAMBERS CORPORATION, Defendant-Appellee. LANDMARK DEVELOPMENT CORPORATION, and Serv-Well Furniture Company, Inc., Plaintiffs-Counterclaim-Defendants-Appellees, v. CHAMBERS CORPORATION, Defendant-Counterclaimant-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Howard F. Daniels, Blecher, Collins & Weinstein, Los Angeles, Cal., for Landmark Development Corp., et al.
Max Gillam, Latham & Watkins, Los Angeles, Cal., for Chambers Corp.
Appeal from the United States District Court for the Central District of California.
Before BROWNING, Chief Judge, GOODWIN and KENNEDY, Circuit Judges.
This is an appeal from the district court's grant of summary judgment for defendant on an antitrust claim and for plaintiffs on a counterclaim for fraud and breach of contract. We affirm.
Chambers Corporation manufactures kitchen stoves and ovens. Serv-Well Furniture Company, a California retail and wholesale applicance store, has purchased Chambers products since 1975 from Schreiber, Chambers' only authorized distributor in Southern California.
Serv-Well believed other dealers were receiving Chambers products from Schreiber at a lower price. It devised a scheme whereby Landmark Development Corp., a paper corporation founded by officers of Serv-Well, would purchase large quantities of goods directly from Chambers by falsely claiming the goods were not intended for resale but for installation by Landmark in modular houses on the Alaska North Slope. Landmark obtained two train carloads of Chambers' products and diverted them to Serv-Well who resold them to retailers in Schreiber's exclusive territory.
When Chambers learned of the diversion, it informed Landmark that it would sell Landmark no more goods absent a satisfactory explanation. When it received no explanation, Chambers terminated shipments to Landmark.
Landmark and Serv-Well then filed this suit, alleging Chambers' refusal to sell to Landmark was a per se violation of section 1 of the Sherman Act, 15 U.S.C. Sec. 1 (1982). The complaint alleged that Chambers had conspired with its distributors, Schreiber and R & K Distributors, Inc. (Chambers' only distributor in Northern California), to refuse to deal with Landmark and Serv-Well as part of a plan to restrict competition and maintain retail prices. Chambers counterclaimed for fraud, breach of contract, interference with contractual relations, and breach of implied covenant of good faith and fair dealing.
Both sides moved for summary judgment. The district court granted summary judgment for Chambers on the complaint and for Landmark and Serv-Well on the counterclaims.
Landmark and Serv-Well assert Chambers and Schreiber conspired to terminate them in order to eliminate price competition--a per se violation of the antitrust laws. Chambers moved for summary judgment on the ground that its decision to refuse to sell to Landmark was a unilateral one, motivated by Landmark's deceptive conduct and Chambers' adherence to a system of exclusive regional distributorships.
Chambers offered detailed statements of its sales manager and a consistent pattern of marketing and warranty servicing requirements to demonstrate the exclusivity of its distributorship system. In response Landmark and Serv-Well rely on a provision in Chambers' contract with Schreiber stating Schreiber could sell outside its "primary" territory. As Schreiber's chief sales executive explained, however, this clause merely indicated that Chambers did not enforce its exclusive distribution system contractually. The uncontradicted evidence established that Chambers did enforce such a system through a course of dealing. Moreover, the record established that Serv-Well's vice-president knew of Chambers' exclusive distributorship agreement with Schreiber--he admitted he fabricated the story that Chambers would use the goods in Alaska because he knew Alaska was outside Schreiber's territory.
Landmark's fraud in purchasing products purportedly for its own use in Alaska and reselling them to dealers in Schreiber's exclusive territory was a legitimate business reason for Chambers' refusal to sell more of its product to Landmark. The undisputed proof of this legitimate business reason was sufficient to preclude an inference of a vertical price-maintenance conspiracy from the refusal to sell to Landmark alone, and to impose upon plaintiffs the burden of advancing additional specific evidence of such a conspiracy. "Once allegations of a conspiracy have been rebutted by probative evidence showing alternative, legitimate business reasons for the defendant's conduct, to avoid summary judgment the plaintiff must come forward with specific factual support for its allegations." Program Engineering, Inc. v. Triangle Publications, Inc., 634 F.2d 1188, 1195 (9th Cir.1980). See also First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 280, 88 S.Ct. 1575, 1588, 20 L.Ed.2d 569 (1968); Blair Foods, Inc. v. Ranchers Cotton Oil, 610 F.2d 665, 672 (9th Cir.1980).
The Supreme Court recently described the kind of specific factual support required to bar summary judgment in these circumstances. More is required than proof of termination of a dealer following competitor complaints:
There must be evidence that tends to exclude the possibility that the manufacturer and nonterminated distributors were acting independently.... [T]he antitrust plaintiff should present direct or circumstantial evidence that reasonably tends to...
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