Penn Galvanizing Company v. Lukens Steel Company, 71-1777.
| Decision Date | 24 October 1972 |
| Docket Number | No. 71-1777.,71-1777. |
| Citation | 468 F.2d 1021 |
| Parties | PENN GALVANIZING COMPANY, Appellant, v. LUKENS STEEL COMPANY. |
| Court | U.S. Court of Appeals — Third Circuit |
H. Laddie Montague, Jr., Philadelphia, Pa. (David Berger, David Berger, P. A., Philadelphia, Pa., on the brief), for appellant.
Edward W. Mullinix, Philadelphia, Pa. (Michael J. Mangan, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., James F. Mulligan, Gen. Counsel, Coatesville, Pa., on the brief), for appellee.
Before VAN DUSEN, ALDISERT and HUNTER, Circuit Judges.
This is an appeal from the June 25, 1971, order by the district court denying Penn Galvanizing's motion for a preliminary injunction.
Penn Galvanizing Company, plaintiff, specializes in the inspection of steel plate by ultrasonic devices. Defendant, Lukens Steel Company, is one of the two major producers of HY-80 steel plates, which are used in the production of submarine hulls. Lukens also performs ultrasonic testing. The Electric Boat Division of General Dynamics Corporation (Electric Boat) builds submarines for the United States Navy, and being without its own testing facilities, Electric Boat contracts out the testing of steel plate. Electric Boat has in the past purchased steel plate from Lukens and has contracted out testing to Penn Galvanizing.
There are two methods of ultrasonic testing, the scanning method and the static method, and the major question in this case is whether the static method meets the Navy's specifications. Under both methods, a 24-inch grid system is superimposed on the steel plate to be inspected. In the static method, the plate is tested only at the intersection points on the grid; in scanning, the vertical and horizontal lines of each block in the grid are tested, as is also one diagonal line within each block. The scanning test thus covers a considerably larger portion of the surface area of the steel plate and consequently reveals imperfections which would pass unnoticed with the static method. Both methods use identical equipment.
The Navy specifications are set out in the margin.1 Up until April 1966, Electric Boat had, on its own, required that steel plate be tested by scanning. Electric Boat apparently dropped this requirement in response to an announcement by Lukens that, because of the higher rejection rate of steel plate tested by scanning, Lukens would charge more for plate to be tested by scanning than for plate to be tested by the static method. In 1969, when Electric Boat reinstituted this requirement, Lukens reiterated its pricing policy; apparently Electric Boat again dropped the requirement. In any event, Electric Boat has not contracted out to Penn Galvanizing any testing of plate for the Navy since sometime in 1970.
Penn Galvanizing's initial complaint contained four counts, two of which are relevant here: (1) that Lukens' quoting a higher price for steel to be scanned was a tie-in in violation of the Sherman Act, 15 U.S.C. § 1 (1970); and (2) that Lukens injured the United States and, derivatively, Penn Galvanizing as a taxpayer, by supplying steel plate with defects which would not be revealed by static testing.2 The complaint requested monetary and injunctive relief. Penn Galvanizing subsequently filed a motion for a preliminary injunction, incorporating the above claims and additionally asserting that a substantial conflict of interest existed when Lukens tested plate which Lukens itself had produced. Penn Galvanizing requested that Lukens be enjoined from selling "defective" plate to the United States, from holding itself out as qualified to perform ultrasonic testing, and from being paid for testing done on plates it produced.
After a hearing, the district court determined that the Navy specifications required only static testing of plate and that Lukens' higher price resulted from the higher rejection rate of steel tested by scanning. It also found that any harm Penn Galvanizing suffered could be remedied by money damages and was, therefore, not irreparable. Consequently, that court denied the motion for a preliminary injunction.
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