May Dept. Store v. Graphic Process Co.

Decision Date27 May 1980
Docket NumberNo. 78-1228,78-1228
Citation637 F.2d 1211
Parties1980-2 Trade Cases 63,364 MAY DEPARTMENT STORE, Plaintiff-Appellant, v. GRAPHIC PROCESS COMPANY, Defendant-Appellee, and Bel-Aire & Associates, Inc., et al., Defendants.
CourtU.S. Court of Appeals — Ninth Circuit

Stephen R. Hasting, Belcher, Henzie & Biegenzahn, Los Angeles, Cal., for plaintiff-appellant.

Edward C. Broffman, Los Angeles, Cal., for defendant-appellee.

Appeal from the United States District Court for the Central District of California.

Before CHOY, HUG, and SKOPIL, Circuit Judges.

CHOY, Circuit Judge.

INTRODUCTION

This is a commercial bribery action for treble damages under the Clayton Act as The historical facts are undisputed. We find, however, that the defendant failed to meet its burden of demonstrating that it was entitled to judgment as a matter of law. Summary judgment was therefore improper. We reverse.

amended by section 2(c) of the Robinson-Patman Act, 15 U.S.C. § 13(c). 1 The district court determined, without an opinion, that transactions between the parties were sales of services and not sales of "goods, wares, or merchandise" as required for an action under section 13(c). Summary judgment was granted to the defendant, Graphic Process Company (Graphic).

For the first time on appeal Graphic challenges the subject matter jurisdiction of this court. May failed to properly plead the interstate commerce requirement of section 13(c). May now requests an opportunity to amend its complaint. We remand with instructions that the district court allow May to attempt to meet the interstate commerce requirement.

FACTS

May Department Store (May) operates a chain of retail outlets. Graphic produces a type of printing medium, "veloxes", used by May to reproduce art work in newspaper advertisements.

From 1965 through 1973 Graphic was awarded contracts by May's agents for the production of veloxes. May alleges two of its employees breached their fiduciary duty and accepted bribes from Graphic. In exchange for the bribes the two employees awarded contracts to Graphic. The bribes were recouped by Graphic through overcharges to May.

May filed a treble damages suit for $267,000 under 15 U.S.C. §§ 13(c) and 15. Summary judgment was awarded to Graphic. The district court found that the production of veloxes was a service performed by Graphic and was not the sale of goods. May appeals.

The parties do not disagree on the technical or physical processes of producing a velox. May creates artwork consisting of photographs and drawings. May's goal is to reproduce this artwork in newspaper ads by transforming the original image into a series of dots, a velox. May delivers the artwork to Graphic to produce the desired dot pattern. May's artwork is transformed into a dot pattern through a photographic process, and a plastic negative is created. This "half-tone" negative is produced on blank plastic stock purchased by Graphic and on equipment owned by Graphic. The negative is then overlaid on positive printing paper supplied by Graphic and processed through a contact printer. Images are produced on the printing paper through the use of light. This printing paper is run through Graphic's developing machine to produce a positive image, a velox. The velox and the original artwork are returned to May. May adds necessary type and paste-up and sends a "camera-ready copy" to a newspaper printer. The printer creates the actual printing plate and produces the final product, newspaper advertisements.

ISSUES

1. Did the district court err in granting the defendant's motion for summary judgment by determining that the underlying transactions were for sale of services and not sale of goods?

2. Is May entitled to amend its complaint to sufficiently plead the interstate commerce requirement of 15 U.S.C. § 13(c)?

STANDARD OF REVIEW OF SUMMARY JUDGMENT

Our examination is limited to determining the appropriateness of summary judgment in this case. California Pacific Bank v. Small Business Administration, 557 F.2d 218 (9th Cir. 1977). In determining whether summary judgment was proper, we are not bound by the usual rule requiring us to accept findings of the trial court unless they are clearly erroneous. Pepper & Tanner, Inc. v. Shamrock Broadcasting, Inc., 563 F.2d 391 (9th Cir. 1977). Our standard of review is identical to that of the trial court. Reed v. Lockheed Aircraft Corp., 613 F.2d 757 (9th Cir. 1980). Summary judgment may properly be granted only when no genuine issue of material fact exists and the moving party is clearly entitled to prevail as a matter of law. Real v. Driscoll Strawberry Associates, 603 F.2d 748, 753 (9th Cir. 1979).

This court recently affirmed its belief that summary judgment is not favored in antitrust litigation. Blair Foods, Inc. v. Ranchers Cotton Oil, 610 F.2d 665, 668 (9th Cir. 1980). We recognize, however, that summary judgment is not to be read out of antitrust cases. When facts are undisputed and all reasonable inferences drawn in favor of the nonmoving party defeat any possible legal theory, summary judgment is proper and should be granted. Mutual Fund Investors, Inc. v. Putnam Management Co., 553 F.2d 620 (9th Cir. 1977). Nevertheless, we are reminded of this court's recent admonition that summary judgment is an extreme remedy. It should not be granted unless the movant has established its right to judgment with such clarity as to leave no room for controversy. It must be found that the other party is not entitled to recover under any discernable circumstances. Real v. Driscoll Strawberry Associates, 603 F.2d 748 (9th Cir. 1979).

GOODS OR SERVICES

It is necessary for an action under section 2(c) of the Robinson-Patman Act that the transactions between the parties constitute a sale of "goods, wares, or merchandise" and not merely a contract for services. Rangen, Inc. v. Sterling Nelson & Sons, Inc., 351 F.2d 851 (9th Cir. 1965), cert. denied, 383 U.S. 936, 86 S.Ct. 1067, 15 L.Ed.2d 853 (1966). The phrase "goods, wares, or merchandise" is not defined by the Act. Similarly, the term "commodity" found in 15 U.S.C. § 13(a) 2 is not defined. Legislative history reveals only that Congress intended the Act to apply to tangible goods and not services. 79 Cong. Rec. 9079, June 11, 1935. See Baum v. Investors Diversified Services, 409 F.2d 872 (7th Cir. 1969); Kennedy Theater Ticket Service v. Ticketron, Inc., 342 F.Supp. 922 (E.D.Pa.1972). Our legislative search discloses no congressional discussions on the distinction between goods and services for purposes of the Act. Courts have understandably struggled to articulate a test to define limitations on the Act's application. 3

The Seventh Circuit found that Congress intended commodities to be limited to tangible products of trade. Baum v. Investors Diversified Services, supra. Evidence of a tangible product is needed to meet the requirements of either section 13(a) or 13(c). See, e. g., La Salle Street Press, Inc. v. McCormick and Henderson, Inc., 293 F.Supp. 1004 (N.D.Ill.1968); Kennedy Theatre Ticket Service v. Ticketron, supra. The Fifth Circuit, however, noted that virtually no service can be performed without the incidental involvement or transfer of a tangible item. Tri-State Broadcasting Co. v. UPI, 369 F.2d 268 (5th Cir. 1966). In Tri-State the Fifth Circuit held that the "dominant This court once examined the distinction between goods and services for purposes of section 13(c). Rangen v. Sterling Nelson & Sons, Inc., supra. In that case a manufacturer of fish food alleged that a competitor bribed Idaho officials to gain business. In determining whether the supplying of fish food was a sale of goods or a service, this court noted that Idaho supplied some ingredients to Rangen. Rangen, however, supplied over fifty percent of the ingredients and did not bill separately for compounding, processing, and mixing services. On these facts this court concluded the transaction was a sale of goods. Rangen, supra at 861.

nature" 4 of a transaction must control in establishing whether it falls within the provisions of the Robinson-Patman Act. In a later case the Fifth Circuit expanded on the dominant nature standard by rejecting a strict comparison of the cost of labor and parts in a repair contract. Aviation Specialties, Inc. v. United Technologies Corp., 568 F.2d 1186 (5th Cir. 1978). That court found that repair work on aircraft engines was a service even though the cost of parts exceeded the cost of labor.

Both parties rely on SCM Corp. v. Xerox Corp., 394 F.Supp. 384 (D.Conn.1975). We find the case helpful but not dispositive of the issue here. In that case the lease of a photocopy machine with payments based on the number of copies produced was held not to be a commodity for purposes of section 13(a). The trial court found that the process of transforming a plain piece of paper into one bearing an image was not a commodity. It noted, however, that the paper was not supplied by Xerox. Where a customer acquires both the paper and the image from the supplier, a closer question is created. SCM, supra at 386, n. 1. The analogy of a photographer sending in negatives for processing was considered. Has such a photographer purchased the process of enlarging the negatives (a service) or enlarged prints (goods)? The trial court left the question unanswered. Id. The issue before us is similar to the trial court's analogy and must now be addressed.

We join other circuits 5 in adopting a "dominant nature" standard to determine if transactions are for sale of services or goods. We accept the Fifth Circuit's reasoning that the dominant nature of a transaction cannot be measured by merely breaking down the costs between intangible service and tangible goods provided. Aviation Specialties, Inc. v. United Technologies Corp., 568 F.2d 1186 (5th Cir. 1978). We do believe, however, that such a comparison might be useful as one of many factors to consider. The supplying of ingredients and...

To continue reading

Request your trial
81 cases
  • Shannahan v. U.S., 96CV1484-J RBB.
    • United States
    • U.S. District Court — Southern District of California
    • 8 Enero 1999
    ...5. A district court's lack of jurisdiction over an action may be raised at any stage of the proceeding. May Dep't Store v. Graphic Process Co., 637 F.2d 1211, 1216 (9th Cir.1980). 6. Another jurisdictional requirement is that the taxpayer must file a claim for refund which the IRS has eithe......
  • Russoli v. Salisbury Tp.
    • United States
    • U.S. District Court — Eastern District of Pennsylvania
    • 20 Octubre 2000
    ...179, United Textile Workers of America, AFL-CIO v. Federal Paper Stock Co., 461 F.2d 849 (8th Cir.1972); May Department Store v. Graphic Process Co., 637 F.2d 1211 (9th Cir.1980)). The Federal Rules of Civil Procedure allow complaints to be amended upon motion, and direct that "leave [to am......
  • Mirmehdi v. United States
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • 3 Noviembre 2011
    ...entitled to an opportunity to amend his complaint if any potential amendment would be futile. See, e.g., May Dep't Store v. Graphic Process Co., 637 F.2d 1211, 1216 (9th Cir.1980). As the Mirmehdis' woes are not caused by insufficient allegations of factual content, no potential amendments ......
  • Tarabochia v. Fbi Special Agent Mickey Adkins
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • 9 Septiembre 2014
    ... ... the dismissal of Appellants' Fourteenth Amendment substantive due process claim because the district court correctly deemed this claim untimely. I ... ...
  • Request a trial to view additional results
1 firm's commentaries
  • How the Fifty States View Electronic Data as a “Product”
    • United States
    • LexBlog United States
    • 31 Julio 2023
    ...history reveals only that Congress intended the Act to apply to tangible goods and not services.” May Dept. Store v. Graphic Process Co., 637 F.2d 1211, 1214 (9th Cir. 1980) (citations omitted). Accord Innomed Labs., LLC v. Alza Corp., 368 F.3d 148, 155 (2d Cir. 2004) (statute only applies ......
4 books & journal articles
  • Robinson-Patman Act
    • United States
    • ABA Antitrust Library Antitrust Law Developments (Ninth Edition) - Volume I
    • 2 Febrero 2022
    ...commodities even though major factor in cost), aff’d , 529 F.2d 972, 978 (8th Cir. 1976). But see May Dep’t Store v. Graphic Process Co., 637 F.2d 1211, 1214-16 (9th Cir. 1980) (fact issue whether sale of finished printing medium used to reproduce artwork for newspaper advertisement constit......
  • Price discrimination and related conduct
    • United States
    • ABA Antitrust Library Antitrust Law and Economics of Product Distribution
    • 1 Enero 2016
    ...at 1038 (holding that comic books were incidental to printing services purchased by publisher); May Dep’t Stores v. Graphic Process Co., 637 F.2d 1211, 1215 (9th Cir. 1980); Aviation Specialties, Inc. v. United Techs. Corp., 568 F.2d 1186, 1191 (5th Cir. 1978); Tri-State Broad. Co. v. Unite......
  • Robinson-Patman Act
    • United States
    • ABA Antitrust Library Model Jury Instructions in Civil Antitrust Cases
    • 8 Diciembre 2016
    ...providing a combination of intangibles, such as repair services, and tangibles, such as parts. May Dep’t Stores v. Graphic Process Co., 637 F.2d 1211, 1216 (9th Cir. 1980) (sale of finished printing media for Robinson Patman Act 245 reproducing art work in newspaper advertising); Laitram Ma......
  • Table of Cases
    • United States
    • ABA Antitrust Library Antitrust Law Developments (Ninth Edition) - Volume II
    • 2 Febrero 2022
    ...539 Maxwell v. Anham USA, Inc.; United States ex rel, 2020 WL 4460364 (E.D. Va. 2020), 1028 May Dep’t Store v. Graphic Process Co., 637 F.2d 1211 (9th Cir. 1980), 539, 570 Mayer Bros. Poultry Farms v. Meltzer, 80 N.Y.S.2d 874 (N.Y. App. Div. 1948), 678 Mayer Paving & Asphalt Co. v. General ......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT