OSC Corp. v. Apple Computer, Inc.

• Citation: 601 F. Supp. 1274
• Decision Date: 11 January 1985
• Docket Number: No. CV 81-6132-PAR (GX).,CV 81-6132-PAR (GX).
• Court: U.S. District Court — Central District of California
• Parties: O.S.C. CORPORATION, etc., et al., Plaintiffs, v. APPLE COMPUTER, INC., Defendant. APPLE COMPUTER, INC., Counterclaim Plaintiff, v. O.S.C. CORPORATION, etc., et al., Counterclaim Defendants.

601 F. Supp. 1274

O.S.C. CORPORATION, etc., et al., Plaintiffs, v. APPLE COMPUTER, INC., Defendant.

APPLE COMPUTER, INC., Counterclaim Plaintiff, v. O.S.C. CORPORATION, etc., et al., Counterclaim Defendants.

No. CV 81-6132-PAR (GX).

United States District Court, C.D. California.

January 11, 1985.

COPYRIGHT MATERIAL OMITTED

Jack Corinblit, Marc M. Seltzer, Corinblit, Shapero & Seltzer, Los Angeles, Cal., for plaintiffs.

Gary L. Reback, Fenwick, Stone, Davis & West, Palo Alto, Cal., for defendant.

MEMORANDUM OF DECISION AND ORDER

RYMER, District Judge.

This case is before the Court on the motion of defendant Apple Computer Inc. ("Apple") for reconsideration of the Court's denial of Apple's motion for summary judgment.

The complaint in this case was filed by six computer dealers in December of 1981, seeking preliminary and permanent injunctive relief restraining Apple from adopting a prohibition against the mail order sale of its products by authorized Apple dealers. On December 4, 1981, plaintiffs moved for a temporary restraining order, but the Court denied that request. The Court then received voluminous briefs and heard oral argument, at the conclusion of which plaintiffs' motion for a preliminary injunction was denied:

It would be the Court's position that the Court does not feel that there is a serious question as to the law involved here and as to the claims made by plaintiffs nor does the Court feel there is a sufficient showing of likelihood of success by the plaintiffs.

Transcript, December 21, 1981 at pp. 96-97.

After a lengthy period of discovery, Apple moved for summary judgment. In response to a motion by plaintiffs, the court granted an extension of the discovery period to allow plaintiffs additional discovery for the purpose of responding to Apple's motion. The summary judgment motion was argued to the Court on March 14, 1983, and the Court took the motion under advisement. On May 27, 1983, this case was transferred to a newly-appointed judge pursuant to the recommended procedure adopted by the Central District of California for the creation of calendars for newly appointed judges. The judge to whom Apple's motion was submitted originally, the Honorable Consuelo B. Marshall, subsequently denied Apple's motion. O.S.C. Corp. v. Apple Computer Corp., 1983-2 Trade Cases (CCH) 65,493 (C.D.Ca.1983). Apple then filed the instant motion for reconsideration, based on decisions of the Ninth Circuit Court of Appeals rendered contemporaneously with and subsequent to Judge Marshall's decision.

The Court has reviewed the entire record in this case, including all of the deposition transcripts. Based upon that entire record, including the briefs, affidavits, declarations and exhibits submitted by the parties, the transcripts of deponents, and the arguments of counsel, the Court finds and concludes as follows:

I.

MOTION TO RECONSIDER

1. Reconsideration of an order denying summary judgment is proper under this Court's Local Rule 7.16, which permits reconsideration when there has been a change in the law.

2. In Filco v. Amana Refrigeration, Inc., 709 F.2d 1257 (9th Cir.1983), cert. dismissed, ___ U.S. ___, 104 S.Ct. 385, 78 L.Ed.2d 331 (1983), this Circuit for the first time determined the evidence that a plaintiff must show in order to overcome a defendant's motion for summary judgment in a case involving a distributor termination following dealer complaints. 709 F.2d 1257, 1262. It thus represents a change, or a clarification amounting to a change, in the law.

3. Filco was neither presented to nor considered by the Court in its prior ruling. The motion for summary judgment was originally filed in October of 1982, and argument was heard and the matter taken under submission on March 14, 1983. The Ninth Circuit rendered its decision in Filco on June 10, 1983; it was first published in the Trade Regulation Reporter on June 27; and Judge Marshall's Order was signed on July 8, 1983.

4. Defendant was in the process of bringing the Filco decision to the Court's attention at the time the Order was published. See Declaration of Kaye Washington in Support of Motion of Apple Computer Inc. for Reconsideration. Given the mails, the intervening holiday, and the time it necessarily takes to brief this kind of matter, and given the time-frame during which Judge Marshall's Order had necessarily been in preparation, Filco was not part of the Court's initial consideration of defendant's motion and this Court finds that there was no failure on the part of the moving party to be reasonably diligent in bringing that decision to the Court's attention.

5. In addition to Filco, there have been other significant changes in the law since Judge Marshall's Order was entered, further warranting reconsideration of the earlier ruling. In Roesch, Inc. v. Star Cooler Corp., 712 F.2d 1235 (8th Cir.1983) the Eighth Circuit vacated its prior opinion. On rehearing en banc the court held that the manufacturer's termination of a dealer following the receipt of complaints from the dealer's competitors was not per se unlawful. In so doing, the court both distinguished and denegrated the Ninth Circuit decision in Girardi v. Gates Rubber Company Sales Division, Inc., 325 F.2d 196 (9th Cir.1963), upon which plaintiffs here also heavily relied. At the same time, the Eighth Circuit vacated its prior opinion in Battle v. Watson, 712 F.2d 1238 (8th Cir.1983), thereby affirming summary judgment for the manufacturer and adopting a rule contrary to that upon which plaintiffs here relied, which recognizes that termination following complaints by competitors of the terminated buyer are not sufficient to allow an inference of conspiracy. Finally, the Federal Trade Commission's order in Russell Stover Candies, which plaintiffs argued to Judge Marshall, was reversed by the Eighth Circuit on September 29, 1983. 1983-2 Trade Cases (CCH) ¶ 65,640 (8th Cir.1983).

In addition, the Ninth Circuit's opinion in Cascade Cabinet Co. v. Western Cabinet & Millwork, 710 F.2d 1366 (9th Cir.1983), which addresses the significance of a defendant's subjective intent in determining whether conduct is per se illegal, was rendered July 5, 1983. It, too, bears on the rationale of Judge Marshall's order.

6. Accordingly, the Court grants Apple's motion to reconsider on the ground that Filco represents a material difference in the law of this Circuit from that presented to the Court at the time of its earlier ruling; and that other authority cited to the Court has been significantly changed as well.¹

II.

SUMMARY JUDGMENT

The following facts are without genuine dispute:

The Parties

1. Apple was founded in 1976 and incorporated in California in early 1977. Carter Dec., Ex. A, at 4.

2. Since its inception, the company has been engaged in the design, development, production, marketing and servicing of small computer systems for individual and business applications. Carter Dec., Ex. A, at 4; Markkula Dec., Ex. A, at 3.

3. At the time of the initiation of this action, plaintiffs O.S.C. Corporation (also known as Olympic Sales Company), Consumer Computers, Advanced Computer Products, Custom Computers, Computer Specialties, and Micro Business World, Inc., were dealers authorized by Apple to sell its products from one or more retail locations. See, e.g., Clardy Tr., p. 242, lines 17-20; Freeman Tr., p. 320, lines 5-9; Monroe Tr., p. 1116, lines 8-11; O'Donnell Tr., p. 1008, lines 1-18; Ravel Tr., Vol. II, p. 103, lines 6-12; p. 82, lines 11-13; DX 4; DX 312. In addition to selling to walk-in customers at authorized locations, these plaintiffs published catalogs and advertisements, soliciting mail and telephone order sales of Apple products from the consuming public. See e.g., Ravel Tr., Vol. I, p. 177, line 9 — p. 178, line 7; Vol. II, p. 250, line 11 — p. 261, line 3; p. 185, line 21 — p. 187, line 6; p. 258, line 24 — p. 259, line 25; Ronen Tr., p. 83, line 21 — p. 84, line 8; p. 85, line 25 — p. 86, line 2; p. 98, lines 10-12; p. 99, line 24 — p. 100, line 1; Clardy Tr., p. 85, line 3 — p. 86, line 11. Such sales are referred to as "mail order sales."

4. All of the plaintiffs carried other manufacturers' lines that competed with the Apple products they sold. See, e.g., Freeman Tr., p. 69, lines 3-11; Monroe Tr., p. 570, lines 17 — p. 573, line 24; p. 576, lines 19-24; O'Donnell Tr., p. 218, lines 1-2, 11-14; p. 809, line 25 — p. 810, line 21; Ronen Tr., p. 18, lines 8-16; Ravel Tr., Vol. II, p. 105, lines 13-17; p. 104, lines 2-11; p. 96, lines 7-12; p. 94, lines 11-16; p. 82, lines 11-21; p. 78, line 21 — p. 80, line 13.

Relevant Product and Geographic Market

5. The computer systems which Apple manufactures and sells are built around a central processing unit and include peripherals, operating software to control the system, and applications software to solve problems. Carter Dec., Ex. A, ¶ 5; Markkula Dec., Ex. A, at ¶¶ 4-8.

6. The company's principal computer system is based on the Apple II central processing unit, first introduced in 1977, which is packaged in a five-inch high, twelve-pound case. Carter Dec., Ex. A, at ¶ 6. The Apple II central processing unit is available in different memory sizes. In 1980, the company introduced the Apple III computer system. The Apple III includes a number of features which are optional accessories for the Apple II, as well as other features not available on the Apple II. Carter Dec., Ex. A, at ¶ 7.

7. Small computer systems are capable of hundreds of applications which vary in complexity and utility — applications such as producing budgets, maintaining business records, controlling inventory, word processing, performing complex pricing analysis, and so forth. Different applications require the computer system to consist of different components. Markkula Dec., Ex. A, at ¶ 8; O'Donnell Tr., p. 842, lines 14-22; Clardy Tr., p. 100, lines 2-8.

8. There are a wide variety of different brands and types of components from...