Little Caesar Enterprises, Inc. v. Smith
| Citation | 34 F.Supp.2d 459 |
| Decision Date | 30 September 1998 |
| Docket Number | CIV.A.No. 93-40520.,CIV.A.No. 93-40521. |
| Parties | LITTLE CAESAR ENTERPRISES, INC., Plaintiff, v. Gary G. SMITH, et al., Defendants. Gary G. Smith, et al., Plaintiffs, v. Little Caesar Enterprises, Inc., Defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
Shawn M. Perry, Perry, Perry, and Perry, Richard A. Lockridge, Lockridge, Grindal, Nauen & Holstein P.L.L.P., Minneapolis, MN, Charles A. Turnbull, O'Reilly, Rancilio, Nitz, Andrews & Turnbull, P.C., Sterling Heights, for Plaintiffs.
Irwin Alterman, Kemp, Klein, Umphrey & Endelman, Troy, Alan C. Harnisch, Harnisch & Hohauser, P.C., Bingham Farms, Stephen D. Susman, Susman Godfrey, L.L.P., Houston, TX, for Defendants.
ORDER IN CASE NUMBER 93-40521 ACCEPTING (1) REPORT AND RECOMMENDATION OF MAGISTRATE JUDGE PEPE ON DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT (III); (2) REPORT AND RECOMMENDATION OF MAGISTRATE JUDGE PEPE ON PLAINTIFFS' MOTION TO AMEND THIS COURT'S AUGUST 7, 1995 ORDER; and (3) REPORT AND RECOMMENDATION OF MAGISTRATE JUDGE PEPE ON PLAINTIFFS' MOTION TO AMEND THE MARCH 31, 1997, CLASS CERTIFICATION ORDER
Before the court are three separate reports and recommendations filed on March 31, 1998 by Magistrate Judge Steven D. Pepe. All three reports concern motions in case number 93-40521, in which plaintiffs are a class of approximately 400 franchisees of defendant, Little Caesar Enterprises, Inc. ("LCE"). This court, pursuant to 28 U.S.C. § 636(b)(1)(B), Fed.R.Civ.P. 72(b), and L.R. 72.1(d)(2) (E.D.Mich. Jan. 1, 1992), has conducted an extensive review of each report and recommendation, as well as the objections and responses submitted by the parties and the authority cited both by the parties and by the magistrate judge. After conducting a de novo review, the court accepts each report and recommendation as the court's findings and conclusions.
While the exhaustive analysis of the magistrate judge obviates the need for a further recitation of the facts and legal issues implicated in the instant motions, this court does wish to specifically address one objection filed by plaintiffs to the report and recommendation on defendant's motion for partial summary judgment (III). The lynchpin of the magistrate judge's recommendation that defendant's motion for summary judgment be granted as to the issue of market power in the tying market is the magistrate judge's conclusion that the plaintiffs are not entitled to a narrowed market definition of the type discussed in Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992), and its progeny. In turn, the key to that conclusion was the magistrate judge's finding that (Rep. & Rec. at 100(emphasis in original).)
Plaintiffs' primary contention with respect to the substance of this analysis is that the magistrate judge relied on an incorrect reading of the Sixth Circuit's decision in PSI Repair Servs., Inc. v. Honeywell, Inc., 104 F.3d 811 (6th Cir.1997). Plaintiffs contend that the PSI court would have allowed a Kodak-type market definition to be submitted to a jury in that case if the antitrust plaintiff had submitted substantial evidence that the defendant had either changed its pricing structure and service policies after locking the plaintiff in or merely concealed material information prior to sale about its pricing structure and service policies. Accordingly, plaintiffs in this case contend that the magistrate judge erred when he read PSI and Kodak as requiring plaintiffs to produce evidence that LCE actually implemented its policy to exclude any potential alternate distributor from the market. Under plaintiffs' reading of PSI, the fact that the magistrate judge found that there was substantial evidence that LCE concealed information related to the ability of alternate distributors to compete without access to logoed goods is sufficient, in and of itself, to justify a narrowed market definition under Kodak.
However, this court agrees with the magistrate judge's interpretation of the holding of the PSI court. In PSI, the court held specifically that:
[i]f there were any evidence in the record that Honeywell took advantage of its customers' imperfect information in order to reap supracompetitive profits in the after-markets for its equipment, we would not hesitate to allow a Kodak-type theory to be submitted to the jury. However, we can find nothing in the record or PSI's brief that alleges that Honeywell engaged in such activities.
PSI, 104 F.3d at 821 (emphasis added). This language seems to imply that an antitrust plaintiff must show that the defendant took some action in an attempt to capitalize on the antitrust plaintiff's imperfect information after the plaintiff became locked in relying on that imperfect information. Accordingly, this court agrees with the magistrate judge's conclusion that one requirement for a narrowed market definition under Kodak and PSI is that plaintiff must show that, "after a substantial number of customers have sunk significant costs that are not recoverable and face other switching costs, the seller takes some action changing its policy (or acting on a prior undisclosed policy) that takes advantage of its locked in customers' lack of information in order `to reap supracompetitive profits' by imposing a burdensome tie-in." (Rep. & Rec. at 50.) Moreover, this court agrees with the conclusion of the magistrate judge that, in this case, "no reasonable jury could find that during the limitations period LCE used its power to deny access to logoed goods to alternate distributors to handicap or exclude any rival distributors." (Rep. & Rec. at 101.)
Accordingly, this court having reviewed the submissions of the parties and being fully advised in the premises,
It is hereby ORDERED that the magistrate judge's March 31, 1998 report and recommendation on defendant's motion for partial summary judgment (III) is ADOPTED.
It is further ORDERED that defendant's motion for partial summary judgment is DENIED on the issue of there being one product and not two, and GRANTED on the issue that plaintiffs have insufficient proof of market power in the tying product market.
It is further ORDERED that the magistrate judge's March 31, 1998 report and recommendation on plaintiffs' motion to amend this court's August 7, 1995 order is ADOPTED.
It is further ORDERED that plaintiffs' motion pursuant to Rule 54(b) is DENIED.
It is further ORDERED that the magistrate judge's March 31, 1998 report and recommendation on plaintiffs' motion to amend the March 31, 1997, class certification order is ADOPTED.
It is further ORDERED that plaintiffs' motion to amend the March 31, 1997, class certification order is DENIED.
SO ORDERED.
REPORT AND RECOMMENDATION ON DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT
Defendant Little Caesar Enterprises, Inc. ("LCE") has filed a motion for partial summary judgment which has been referred for Report and Recommendation under 28 U.S.C. § 636(b)(1)(B).1
The current motion involves only the anti-trust tie-in class certified by this Court in its March 31, 1997, order. Little Caesar Enterprises, Inc. v. Smith, 172 F.R.D. 236 (E.D.Mich.1997). Plaintiffs are approximately 400 franchisees of LCE throughout most of the nation who own and operate carry-out-only Little Caesar restaurant franchises under a mid-1990 Franchise Agreement. These franchisees purchase their supplies needed to operate from Blue Line Distributing, Inc. ("Blue Line"), formerly a wholly owned subsidiary that has now merged with LCE. The class plaintiffs seek damages, declaratory and injunctive relief for alleged antitrust tie-in violations by defendant. During the relevant class period, Blue Line, in areas where it had a warehouse, sold to LCE franchises virtually all goods necessary to operate their...
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