Lucus Automotive Eng'G v. Bridgestone/Firestone

• Citation: 140 F.3d 1228
• Decision Date: 31 March 1998
• Docket Number: No. 95-56706.,95-56706.
• Parties: LUCAS AUTOMOTIVE ENGINEERING, INC., Plaintiff-Appellant, v. BRIDGESTONE/FIRESTONE, INC.; The Firestone Tire and Rubber Company, of New Zealand, Ltd., Defendants, and Coker Tire Company, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

140 F.3d 1228

LUCAS AUTOMOTIVE ENGINEERING, INC., Plaintiff-Appellant, v. BRIDGESTONE/FIRESTONE, INC.; The Firestone Tire and Rubber Company, of New Zealand, Ltd., Defendants and Coker Tire Company, Defendant-Appellee.

No. 95-56706.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 10, 1997.

Decided March 31, 1998.

Maxwell M. Blecher, John E. Andrews, Blecher & Collins, P.C., Los Angeles, California, for plaintiff-appellant.

Richard W. Bethea, Jr., Stophel & Stophel, P.C., Chattanooga, Tennessee, for defendant-appellee.

Appeal from the United States District Court for the Central District of California; John G. Davies, District Judge, Presiding. D.C. No. CV-93-5016 JGD.

Before: O'SCANNLAIN and TASHIMA, Circuit Judges; WHALEY,^* District Judge.

O'SCANNLAIN,^** Circuit Judge:

We must decide whether a distributor and downstream purchaser of vintage automobile tires has standing to bring an antitrust action under the Clayton Act against a competitor and supplier for damages and divestiture.

I

Coker Tire Company, Inc. ("Coker Tire") and Lucas Automotive Engineering, Inc. ("Lucas Automotive") sell vintage automobile tires to customers worldwide. Vintage tires are different from tires used on modern automobiles in terms of their size, dimensions, structure, design and manufacturing. They are replicas of the tires which originally were sold on vintage, antique and collector cars, and are no longer made for use on modern cars. Vintage tires are typically bias ply tires, whereas modern automobile tires are radial construction. Vintage tires are distributed through specialty tire channels of distribution.

Lucas alleges that the relevant market for purposes of this action is limited to original equipment ("OE") major brand vintage tires. These tires bear the trademarks of tires which originally were sold on vintage cars. For American cars, the OE major brands in vintage tires are Firestone, B.F. Goodrich, U.S. Royal and Goodyear. Coker Tire is the exclusive supplier for all of these OE brands except Goodyear, which comprises less than 10% of the market. There are approximately 40,000 tire dealers in the United States for the retail sales of OE major brand vintage tires. Following the district court, we assume that the relevant market is limited to original equipment brand name vintage tires. See Order Granting Defendant's Motion for Summary Judgment at 3 n. 1.

Coker Tire is the world's largest supplier of vintage tires, with distributors in 27 countries and distribution sites in Chattanooga, Tennessee and Santa Fe Springs, California. There are more than 25 brands of vintage tires being sold in the world. Lucas Automotive, headquartered in Long Beach, California, initiated the Firestone Vintage Tire Program in the 1970s, operating since then as the importer and distributor of Firestone vintage tires worldwide. Prior to August 7, 1991, both Coker Tire and Lucas Automotive distributed Firestone brand vintage tires: Coker Tire distributed "wide ovals," vintage tires for "muscle cars" (those made primarily in the 1960s and 1970s), while Lucas Automotive distributed Firestone tires for antique cars. Firestone Tire and Rubber Company of New Zealand, Inc. ("FNZ"), a subsidiary of Bridgestone/Firestone, Inc. ("BFI") and operating under a license agreement with BFI, manufactured and sold the Firestone vintage tires in New Zealand, supplying them to Lucas Automotive for distribution and sale to end users. Because vintage tire production became unprofitable for FNZ in the late 1980s, it decided to cease manufacturing vintage tires in New Zealand. BFI sought to relocate production to a new facility in North America.

On August 7, 1991, BFI invited Lucas Automotive and Coker Tire to submit bids for an exclusive license to manufacture and distribute Firestone brand vintage tires worldwide. BFI limited the bid process to these two companies because they were the two principal sellers of vintage tires and because it was familiar with both organizations. BFI informed Lucas Automotive and Coker Tire of its goals in seeking bids: (1) to maximize the Firestone brand's exposure and to insure the continuity of the business; (2) to move production from New Zealand to North America; and (3) to organize for efficiency and profitability to Firestone. Lucas Automotive resisted the bid process; its final proposal lacked the required financial statements and business and credit references.

In January 1992, BFI selected Coker Tire as its new worldwide manufacturer and distributor of Firestone vintage tires. With the exclusive Firestone distributorship, Coker Tire now controls approximately 75% of the vintage tire market and 90% of the original equipment market, with exclusive rights to all but one of the major brands.¹ BFI contends that Coker Tire's bid proposal was superior to Lucas Automotive's for several reasons. First, Coker Tire's multi-brand marketing approach was consistent with the approach used by BFI at its own stores. Second, the license fee proposed by Coker Tire was based on a sliding percentage which decreased as sales went up, providing an incentive for Coker Tire to increase volume which was consistent with BFI's goal of greater name recognition. Lucas Automotive's license fee, on the other hand, was based on a straight percentage of cost of goods which provided no incentive in reduced expense for Lucas Automotive to increase its sales volume. Third, Corky Coker demonstrated "far superior public relations skills" than Stanley Lucas. And finally, Coker Tire had several management-level employees whereas Stanley Lucas was the sole management-level employee at Lucas Automotive. On April 2, 1992, BFI entered into a License & Lease Agreement with Coker Tire, giving it permission to manufacture and to distribute certain classic-vintage tires exclusively worldwide in accordance with BFI's trademarks and patents on classic-vintage Firestone brand tires.

On August 20, 1993, Lucas Automotive filed an action against BFI, FNZ and Coker Tire. The complaint contained six different counts, with each containing a separate cause of action: (1) antitrust violations based on § 2 of the Sherman Act, 15 U.S.C. § 2, and § 7 of the Clayton Act, 15 U.S.C. § 18; (2) breach of express contract; (3) breach of implied contract; (4) fraud; (5) tortious interference with prospective economic advantage; and (6) bad faith denial of existence of contract. Only the first count pertained to Coker Tire. The complaint alleged that Coker Tire, BFI and FNZ had conspired to monopolize the worldwide market for the "marketing and sale" of vintage automobile tires in violation of § 2 of the Sherman Act. The complaint also alleged that Coker Tire's acquisition of vintage tire molds and worldwide distribution rights from BFI violated § 7 of the Clayton Act, in that the acquisition would substantially lessen competition and create a monopoly in the marketing and sale of these tires throughout the world.

On December 19, 1994, BFI and FNZ filed a motion for summary judgment with respect to all the claims against them. On February 21, 1995, the district court awarded summary judgment to BFI and FNZ on all counts pertaining to them, including the alleged conspiracy violations by BFI and FNZ of § 2 of the Sherman Act and § 7 of the Clayton Act contained in the first count. The district court ruled that there was no specific intent to monopolize on the part of BFI and FNZ and that there were legitimate business reasons for BFI to prefer Coker Tire over Lucas Automotive as its exclusive licensee to manufacture and distribute Firestone vintage tires. Lucas Automotive did not appeal from this ruling. Thereafter, only that part of the first count pertaining exclusively to Coker Tire remained pending before the district court.

On June 27, 1995, Coker Tire, the remaining defendant, filed its summary judgment motion. The district court granted summary judgment in favor of Coker Tire on October 17, 1995. It concluded that: (1) Lucas Automotive has not produced evidence to show that its losses flow from any alleged monopoly by Coker Tire; (2) the fact that Coker Tire has the exclusive distribution rights to other major brand vintage tires does not transform Lucas Automotive's unsuccessful bid for the Firestone line into an antitrust injury; (3) Lucas Automotive has not produced any evidence to show that Coker Tire has in fact raised prices on the brand name vintage tires it distributes; and (4) Lucas Automotive also lacks standing to bring this claim because it has not actually purchased any tires from Coker Tire.

Lucas Automotive timely appealed.

II

Lucas Automotive alleges that Coker Tire violated § 7 of the Clayton Act when it acquired the exclusive right to manufacture and to distribute Firestone brand vintage tires worldwide. Section 7 provides in pertinent part:

No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where ... the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.

15 U.S.C. § 18. Pursuant to that allegation, Lucas Automotive seeks to recover treble damages and to compel divestiture of the Firestone distributorship.

Lucas Automotive is both a potential competitor of Coker Tire at the distributor level and a purchaser at the subdistributor level. Therefore, we must ask whether Lucas Automotive has either competitor standing or purchaser standing to assert either a treble damages claim or a divestiture claim against Coker Tire.

A

We first examine whether Lucas Automotive has standing to bring an action for treble damages against Coker Tire, either as a competitor...