Metro Communications Co. v. Ameritech Mobile Communications, Inc., 92-1356

• Decision Date: 27 January 1993
• Docket Number: No. 92-1356,92-1356
• Citation: 984 F.2d 739
• Parties: 1993-1 Trade Cases P 70,105 METRO COMMUNICATIONS COMPANY and Royal Radio Sales and Service, Inc., Plaintiffs-Appellants, v. AMERITECH MOBILE COMMUNICATIONS, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 739

984 F.2d 739

1993-1 Trade Cases P 70,105

METRO COMMUNICATIONS COMPANY and Royal Radio Sales and Service, Inc., Plaintiffs-Appellants, v. AMERITECH MOBILE COMMUNICATIONS, INC., Defendant-Appellee.

No. 92-1356.

United States Court of Appeals Sixth Circuit.

Argued Nov. 12, 1992.

Decided Jan. 27, 1993.

Jerome D. Frank (argued and briefed), Lawrence C. Atorthy (briefed), Seyburn, Kahn, Ginn, Bess & Howard, Southfield, MI, for plaintiffs-appellants.

Lawrence Campbell, Kenneth J. McIntyre (argued and briefed), Robert W. Powell, John C. O'Meara, Brian K. Zahra, Dickinson, Wright, Moon, Van Dusen & Freeman, Detroit, MI, for defendant-appellee.

Before BOGGS and SILER, Circuit Judges, and LAMBROS, Chief District Judge. ^*

BOGGS, Circuit Judge.

The plaintiffs, retail marketers of cellular telephone services, sued the defendant, a provider of cellular telephone services and equipment, for breach of an agency contract. The district court granted the defendant's motion for summary judgment and held that the defendant's right to contract with competitors of the plaintiffs is not limited by an implied covenant of good faith in its contracts with the plaintiffs; that the contracts were not modified by extracontractual written representations; and that the plaintiffs had failed to satisfy the elements of their price discrimination claim pursuant to the Robinson-Patman Act, 15 U.S.C. § 13(a), (d), & (e). We affirm.

I

The plaintiffs, Metro Communications Company ("Metro") and Royal Radio Sales and Service, Inc. ("Royal"), are Michigan corporations engaged in retail marketing of cellular telephone services in the Detroit area. Each is a one-store operation, and each entered into an agency contract with Ameritech Mobile Communications, Inc. ("Ameritech"), a provider of cellular telephone services and equipment. Metro entered into a three-year agency contract with Ameritech on April 1, 1985, which was succeeded by a five-year contract on November 1, 1988. Royal entered into a contract on November 30, 1987, and the current contract on January 1, 1990. Although Royal and Metro were the first entities in the Detroit area with whom Ameritech contracted, Ameritech now has agency agreements with additional agents and retailers of cellular telephone services and equipment. All parties distinguish between agents, or small dealers, and retailers, or large, multi-location dealers.

Royal and Metro also entered into equipment contracts with Ameritech, under which they were required to purchase a minimum number of cellular telephones per year in order to obtain favorable distributor prices. The equipment agreements required the plaintiffs to maintain the same kind of facility, sales force, and solicitation of Ameritech equipment as they were required to provide under the agency agreements.

On June 7, 1985, Ameritech entered into an agency contract with Metrocell, a cellular telephone company. In April 1987, Ameritech entered into an agency contract with Celluland of Michigan, a franchisee of a California-based franchisor. In 1990, a subsidiary of Ameritech purchased Celluland. Celluland currently operates under the name CarFone Communications, Inc.

In late 1987 and 1988, Ameritech began expanding its operation in the Detroit area. It enlisted multi-location, high-volume retailers such as ABC Appliance, Fretter, and Highland Superstores to sell Ameritech cellular service.

The core of the plaintiffs' complaint is "that Ameritech entered into substantially more favorable contracts with Metrocell, another 5 Star Dealer [Ameritech's top agent category], and with so-called 'authorized retailers,' discount chains ABC Warehouse, Fretter and Highland Appliance, in breach of its duty of good faith and fair dealing." The plaintiffs assert three separate claims: 1) that Ameritech breached an implied covenant of good faith and fair dealing by entering into agreements with other agents and retailers that were extremely unfavorable to the plaintiffs; ¹ 2) that Ameritech modified the agency contract with Metro by agreeing that it would treat Metro "substantially equally with its other agents;" and 3) that Ameritech discriminated in favor of competing agents in the commissions paid for sales of cellular telephone service in violation of Section 2(a), (d), & (e) of the Robinson-Patman Act, 15 U.S.C. § 13(a), (d), & (e). ²

After first denying Ameritech's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the district court granted Ameritech's motion for summary judgment and dismissed the complaint. The district court held that all of the plaintiffs' claims that were grounded in alleged price discrimination in favor of competing agents were barred by the two-year contractual statute of limitations because the principals of both Royal and Metro admitted under oath that they had sufficient knowledge of the alleged discrimination more than two years before the complaint was filed. Second, the court ruled that Ameritech did not breach an implied covenant of good faith because Ameritech's unrestricted competition with the plaintiffs through other retailers and agents was permitted by the clear language of the contract. Third, the court ruled that alleged oral and extracontractual written representations did not modify the contract because they represented an impermissible limitation on the right-to-compete clause through terms inconsistent with the expressed language, rather than a permissible addition to the contract with consistent terms. Finally, the court determined that plaintiffs failed to satisfy the requirements of a Robinson-Patman claim.

II

We review de novo the district court's grant of Ameritech's motion for summary judgment. Baggs v. Eagle-Picher Industries, Inc., 957 F.2d 268, 271 (6th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 466, 121 L.Ed.2d 374 (1992). We may affirm the district court only if we determine that the pleadings, affidavits, and other submissions show "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).

The moving party need not support its motion with evidence disproving the nonmoving party's claim, but need only "show[ ]--that is, point[ ] out to the district court--that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986). The pivotal question before us is whether the parties bearing the burden of proof--the plaintiffs--have presented a jury question as to each element of their case. Celotex Corp., 477 U.S. at 322, 106 S.Ct. at 2552. The plaintiffs must present more than a mere scintilla of evidence in support of their position; the plaintiffs must present evidence "on which the jury could reasonably find for the plaintiff[s]." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986).

III

The plaintiffs concede that their contracts contain no express statements that Ameritech must treat each of its agents in a substantially equal manner. Instead, the plaintiffs argue that the implied covenant of good faith and fair dealing limits Ameritech's freedom to establish significantly more favorable contractual terms with competing agents.

Under Illinois law, ³ an implied covenant of good faith is part of every contract and limits the amount of discretion enjoyed by each party to the contract. Dayan v. McDonald's Corp., 125 Ill.App.3d 972, 990, 81 Ill.Dec. 156, 170, 466 N.E.2d 958, 972 (1984), later proceeding, 138 Ill.App.3d 367, 485 N.E.2d 1188 (1985). Specifically, "a party vested with contractual discretion must exercise that discretion reasonably and with proper motive, and may not do so arbitrarily, capriciously, or in a manner inconsistent with the reasonable expectations of the parties." 125 Ill.App.3d at 991, 81 Ill.Dec. at 170, 466 N.E.2d at 972.

In this case, the agency contracts grant Ameritech the discretion to compete with the plaintiffs. The relevant provision states:

During the term of this Agreement, or thereafter, Ameritech Mobile reserves the right, without obligation or liability to Agent, to market CRS [cellular radio service] in the same area served by Agent, whether through Ameritech Mobile's own employees or through others, including other Agents and Resellers.

Therefore, the specific issue before us is whether, in light of this language, Ameritech had the right to negotiate substantially more favorable contract terms with the plaintiffs' competitors. The language of the contract places no restrictions on Ameritech's right to compete with the plaintiffs. Moreover, the plaintiffs admitted in depositions that they understood when they entered the contracts that Ameritech had a right to compete with the plaintiffs and to attempt to undersell them.

In essence, the plaintiffs are arguing that although Ameritech has a right to compete, that right has limits and should not be so broad that it makes their contracts so uncompetitive that they are useless. But the implied covenant of good faith is a construction aid that helps a court determine the intent of the parties; it cannot be used to add terms to the contract when there is no evidence that the parties intended that those terms be included. Anderson v. Burton Associates, Ltd., 218 Ill.App.3d 261, 266, 161 Ill.Dec. 72, 76, 578 N.E.2d 199, 203 (1991). In this case, Ameritech's right to compete is unrestricted. As the district court stated, "Plaintiffs are attempting to read an implied restricted competition clause into an express right to compete clause." Metro Communications, 788 F.Supp. at 1432.

This case is similar to Patel v. Dunkin' Donuts of America, Inc., 146 Ill.App.3d 233, 100 Ill.Dec. 94, 496 N.E.2d 1159 (1986). There, the plaintiff and the defendant entered into a franchise agreement providing the plaintiff with a donut shop. The agreement included a provision that...