Leaco Enterprises, Inc. v. General Elec. Co., Civ. No. 87-1026-JU.

• Decision Date: 07 May 1990
• Docket Number: Civ. No. 87-1026-JU.
• Parties: LEACO ENTERPRISES, INC., an Oregon corporation, dba Leaco Electric Co., an assumed business name, Plaintiff, v. GENERAL ELECTRIC CO., a New York corporation, Defendant.
• Court: U.S. District Court — District of Oregon

737 F. Supp. 605

LEACO ENTERPRISES, INC., an Oregon corporation, dba Leaco Electric Co., an assumed business name, Plaintiff, v. GENERAL ELECTRIC CO., a New York corporation, Defendant.

Civ. No. 87-1026-JU.

United States District Court, D. Oregon.

May 7, 1990.

Charles Paulson, Carl G. Kiss, Portland, Or., for plaintiff.

David P. Templeton, Laura Van Harlingen Potter, Douglas C. MacCourt, Martin, Bischoff, Templeton, Ericsson & Langslet, Portland, Or., for defendant.

OPINION

FRYE, District Judge:

The matter before the court is the objections of plaintiff, Leaco Enterprises, Inc. (Leaco), to the Findings and Recommendation of the Honorable George E. Juba, United States Magistrate, dated December 13, 1989. Judge Juba recommends to this court that the motion for summary judgment (# 116) of defendant, General Electric Co. (GE), be granted in its entirety. Leaco alleges three claims against GE: 1) the intentional interference with contract; 2) the intentional interference with prospective business relations; and 3) the violation of section 1 of the Sherman Anti-Trust Act, 15 U.S.C. § 1.

UNDISPUTED FACTS

Leaco is an Oregon corporation located in The Dalles, Oregon. Leaco is in the business of electrical contracting, i.e., performing electrical services for residential and commercial sites. The shares of Leaco are owned by Laurel and Wayne Lease. Leaco qualifies as a small, woman-owned business in a labor surplus area under the regulations of the Small Business Administration (SBA).

GE owns 91.9% of the shares of Canadian General Electric (CGE). In 1983, GE transferred its hydroelectric turbine manufacturing equipment and technology to CGE. Since that time, GE has purchased hydroelectric turbine equipment from CGE, and CGE has used the installation services of GE when CGE has had contracts for hydroelectric work in the United States.

On June 3, 1985, CGE was awarded a contract by the United States Army Corps of Engineers, under which CGE was to act as the prime contractor on a project to refurbish hydroelectric generators at the John Day Dam. On June 13, 1985, personnel of CGE and GE met to discuss the working arrangement between the two corporations in general and with respect to the project at the John Day Dam. After that meeting, Edward Feuerstein of GE and Merritt Gordon of CGE disagreed regarding the extent of the consensus, if any, which was reached at the meeting and whether they had reached any agreement with respect to the project at the John Day Dam. Throughout July, 1985, the senior managers of GE and CGE continued to dispute whether GE or CGE would be responsible for the installation work for the project at the John Day Dam.

On July 22, 1985, Bill Corp, a manager for CGE went to The Dalles, Oregon to find a labor broker for the project at the John Day Dam. Corp contacted Leaco, which submitted proposals to Corp on July 24, 1985. On August 1, 1985, Corp called Leaco to advise Leaco 1) that it had been selected as a subcontractor for the project at the John Day Dam; 2) that CGE "accepted Leaco's Proposal # 1 with a few clarifications and modifications as discussed via phone;" and 3) that a purchase order with the "Terms of Reference" would be issued on August 6, 1985.

On August 6, 1985, Corp sent a letter to Leaco which listed terms of the proposal accepted by CGE. The letter concluded:

I believe the above represents our 1 August 1985 discussion. Would you reply by return mail your agreement and acceptance of these terms which will form the basis of our agreement.

This agreement may be cancelled by either party for any reason with thirty days written notice. All costs incurred or accrued to that point would then become payable. No penalties would be applied or considered from either party.

Exhibit 30 to Defendant's Motion for Summary Judgment.

Meanwhile, also on August 6, 1985, John A. Urquhart, Senior Vice President of GE, telephoned William R.C. Blundell, Chairman of the Board and CEO of CGE. Neither man was aware that CGE might have entered into a contract with Leaco, or that Leaco was a small, woman-owned business located in an area with a surplus of labor. Urquhart instructed Blundell to have his managers resolve their differences with the managers of GE regarding the contract for the project at the John Day Dam, stating that the installation work should be done by GE. Blundell agreed to follow Urquhart's instructions.

On August 13, 1985, Leaco received Corp's letter of August 6, 1985.

On August 16, 1985, Corp and Al Driediger of CGE, and Feuerstein, Welton Francis and Dick Dickens of GE met at the airport in Toronto, Canada. The employees of GE informed the employees of CGE that the installation work for the project at the John Day Dam was to be done by GE. Corp then informed the employees of GE that he had already sent a purchase order to Leaco. Corp then called Leaco to cancel GE's contract with Leaco. Later that day, Laurel Lease from Leaco sent Corp a letter advising Corp that Corp's letter of August 6, 1985 correctly stated the terms of the agreement, and that Leaco accepted the terms. Lease backdated the letter to August 14, 1985.

APPLICABLE LAW

When either party objects to any portion of a magistrate's Findings and Recommendation, the district court must make a de novo determination of that portion of the magistrate's report. 28 U.S.C. § 636(b)(1)(B); McDonnell Douglas Corp. v. Commodore Business Machines, Inc., 656 F.2d 1309, 1313 (9th Cir.1981), cert. denied, 455 U.S. 920, 102 S.Ct. 1277, 71 L.Ed.2d 461 (1982).

Summary judgment is appropriate only where "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The initial burden is on the moving party to point out the absence of any genuine issue of material fact. Once the initial burden is satisfied, the burden shifts to the opponent to demonstrate through the production of probative evidence that there remains an issue of fact to be tried. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).

On a motion for summary judgment, all reasonable doubt as to the existence of a genuine issue of fact should be resolved against the moving party. Hector v. Wiens, 533 F.2d 429, 432 (9th Cir.1976). Where different inferences can be drawn, summary judgment is inappropriate. Sankovich v. Life Ins. Co. of N. Am., 638 F.2d 136, 140 (9th Cir.1981).

ANALYSIS AND RULING

1. Antitrust Claim

As a matter of law, a parent corporation cannot conspire with its wholly-owned subsidiary. Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 777, 104 S.Ct. 2731, 2744, 81 L.Ed.2d 628 (1984). Where the subsidiary is not wholly owned, the court must determine whether the parent and subsidiary share a unity of purpose in order to determine whether there was a conspiracy. Aspen Title & Escrow, Inc. v. Jeld-Wen, Inc., 677 F.Supp. 1477, 1486 (D.Or.1987) (Redden, J.).

The court may consider various factors in determining whether corporations share a unity of purpose: 1) the legal relationship between the corporations; 2) the makeup of the board of directors of the subsidiary; 3) the corporate purposes of each of the corporations; and 4) the amount of autonomy exercised by the subsidiary.

In his Findings and Recommendation, Judge Juba concludes that GE and CGE share a unity of purpose despite evidence that CGE has few direct ties to GE; that GE has a minority of members on the board of directors of CGE; that CGE operates with sufficient automony to enter into contracts of up to ten million dollars without the prior authorization of GE; and that GE has approved the employment of twelve out of CGE's 14,000 employees. In his Findings and Recommendation, Judge Juba also finds, as a matter of law, that the relationship between GE and CGE is to the benefit of CGE.

The Ninth Circuit has stated that "the district judge's function is not to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Sorosky v. Burroughs Corp., 826 F.2d 794, 798 (9th Cir. 1987). The first issue is whether the evidence presented by the parties creates a genuine issue of material fact as to the unity of purpose between GE and CGE because summary judgment is inappropriate where different inferences can reasonably be drawn from the evidence.

GE contends that since it owns 91.9% of the shares of CGE, this is a de minimis variation from total ownership and therefore establishes the unity of purpose of the two corporations as a matter of law. In Aspen Title & Escrow, supra, this court found that the 97.5% ownership by a parent corporation of a subsidiary was a de minimis variation from total ownership, but that 60% and 75% ownership by a parent corporation of a subsidiary does not preclude the subsidiary from conspiring with the parent corporation. 677...