Pink Supply Corp. v. Hiebert, Inc.

• Decision Date: 14 April 1986
• Docket Number: Nos. 85-5180,85-5195,s. 85-5180
• Citation: 788 F.2d 1313
• Parties: 1986-1 Trade Cases 67,046 PINK SUPPLY CORP., Appellant/Cross-Appellee, v. HIEBERT, INC., Northern Design Products, Inc., Interior Design Products, Michael Ketchum and John Brion, Appellees/Cross-Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1313

788 F.2d 1313

1986-1 Trade Cases 67,046

PINK SUPPLY CORP., Appellant/Cross-Appellee, v. HIEBERT, INC., Northern Design Products, Inc., Interior Design Products, Michael Ketchum and John Brion Appellees/Cross-Appellants.

Nos. 85-5180, 85-5195.

United States Court of Appeals Eighth Circuit.

Submitted Dec. 11, 1985.

Decided April 14, 1986.

Bradley G. Clary, St. Paul, Minn., for appellant/cross-appellee.

Daniel R. Shulman, Minneapolis, Minn., for appellees/cross-appellants.

Before ROSS, Circuit Judge, BRIGHT, Senior Circuit Judge, and BOWMAN, Circuit Judge.

ROSS, Circuit Judge.

After its termination as a dealer in office furniture manufactured by Hiebert, Inc., appellant, Pink Supply Corporation, brought this antitrust action against appellees, Hiebert and four sales representatives, alleging a price-fixing and boycott conspiracy in violation of section 1 of the Sherman Act, 15 U.S.C. Sec. 1 (1982). In addition, the complaint alleged a similar conspiracy between Hiebert and another dealer, Dayton's Commercial Interiors, not a party to this action. Upon completion of discovery, the district court ¹ granted the appellees' motion for summary judgment, ² finding an absence of concerted action within the meaning of the Sherman Act. ³ Specifically, the district court concluded that the sales representatives, as agents in the nature of employees, could not as a matter of law conspire with Hiebert, their principal, and that Pink Supply had offered insufficient admissible evidence of a conspiracy between Hiebert and its dealer, Dayton's, on which to proceed to trial. We affirm.

I.

The sales representatives named by appellant as coconspirators with Hiebert were Interior Design Products, Inc.; Northern Design Products, Inc., a successor corporation to Interior Design; Michael Ketchum, founder and president of the design corporations, and John Brion, an employee in Ketchum's companies and formerly an employee of Pink Supply. At all relevant times, the representatives served as commissioned sales agents for Hiebert. Appellant alleged that the representatives conspired with Hiebert to eliminate Pink Supply's dealership in an effort to fix resale prices in Hiebert furniture.

The Supreme Court has recently reiterated that section 1 of the Sherman Act prohibits only those unreasonable restraints of trade which are "effected by a 'contract, combination * * *, or conspiracy' between separate entities." Fisher v. City of Berkeley, --- U.S. ----, 106 S.Ct. 1045, 1049, 89 L.Ed.2d 206 (1986), quoting Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 104 S.Ct. 2731, 2740, 81 L.Ed.2d 628 (1984) (emphasis in original).

The economic substance of the relationship between two entities determines whether they are "separate" for purposes of a section 1 conspiracy. A corporation cannot, for example, conspire with its own officers and employees. Copperweld, supra, 104 S.Ct. at 2741. "The officers of a single firm are not separate economic actors pursuing separate economic interests, so agreements among them do not suddenly bring together economic power that was previously pursuing divergent goals." Id. Similarly, a parent corporation and its wholly owned subsidiary, even if separately incorporated, are not legally capable of conspiracy because their normal relationship necessarily involves a unity of economic interest. Id. at 2742:

A parent and its wholly owned subsidiary have a complete unity of interest. Their objectives are common, not disparate; their general corporate actions are guided or determined not by two separate corporate consciousnesses, but one. They are not unlike a multiple team of horses drawing a vehicle under the control of a single driver. With or without a formal "agreement," the subsidiary acts for the benefit of the parent, its sole shareholder. If a parent and a wholly owned subsidiary do "agree" to a course of action, there is no sudden joining of economic resources that had previously served different interests, and there is no justification for Sec. 1 scrutiny.

The inherent unity of economic interest and purpose which characterizes the relationship between a corporation and its officers, employees and wholly owned subsidiaries also precludes a finding of conspiracy between a corporation and certain agents. Corporate agents, even if separately incorporated, who function as an integral part of the corporate entity, represent no separate step in the distribution chain, act for the corporate principal's benefit and are functionally indistinguishable from employees, may lack the independent economic consciousness necessary to be considered conspirators separate from their principal. See, e.g., Fuchs Sugars & Syrups, Inc. v. Amstar Corp., 602 F.2d 1025, 1028-31 (2d Cir.), cert. denied, 444 U.S. 917, 100 S.Ct. 232, 62 L.Ed.2d 172 (1979).

The sales representatives, unlike Hiebert's dealers, did not stock furniture for resale, sell Hiebert furniture, arrange shipment or install or service merchandise. Their sole function in the context of Hiebert's organization was to generate business by persuading potential customers to select the Hiebert line. The representatives had no authority to set prices, no discretion to arrange terms of sale and no ability to accept orders. Orders generated through their efforts had to be approved by Hiebert and were filled by Hiebert or its dealers. The representatives assumed no credit risk in connection with a sale and bore no risk of loss or injury to the goods.

Customers selected the source from which Hiebert furniture orders were filled. When customers required bids, Hiebert dealers within the applicable trade territory could compete against each other. The selection of Hiebert or a particular dealer to fill an order could be based on factors such as price, inventory in stock, design services and other considerations motivating customer choice. The sales representatives did not compete with Hiebert or its dealers in any sense; nor did they designate the source through which a particular sale was placed.

Both Hiebert and its dealers benefited from the representatives' promotional efforts. Some dealer business, including that of Pink Supply, was generated by the representatives at no cost to the dealers. While the dealers made their profit from the retail mark-up over the wholesale price of the furniture, the representatives received a commission based upon total sales of Hiebert products within their territory. Hiebert, not the dealers, paid the commission.

The representatives therefore did not constitute an independent step in the Hiebert distribution process. They served no purpose other than the promotion of products on behalf of Hiebert and other represented manufacturers. See Fuchs Sugars, supra, 602 F.2d at 1028. Currently Hiebert no longer employs sales representatives and uses its own employees to perform the functions previously assigned to the representatives. We conclude that viewed from the perspective of Hiebert's organization, the sales agents were so closely intertwined in economic interest and purpose with Hiebert as to amount to a unified economic consciousness incapable of conspiring with itself. We reach this conclusion notwithstanding the representatives' separate ownership and incorporation. Cf. Copperweld, supra, 104 S.Ct. at 2743 n. 21 ("[S]eparate incorporation does not necessarily imply a capacity to conspire. * * * [S]ubstance, not form, should determine whether a separately incorporated entity is capable of conspiring under Sec. 1.")

We have, however, recognized an exception to the general principle that a corporation cannot conspire with agents of this kind. When the interests of principal and agents diverge, and the agents at the time of the conspiracy are acting beyond the scope of their authority or for their own benefit rather than that of the principal, they may be legally capable of engaging in an antitrust conspiracy with their corporate principal. See Green v. Associated Milk Producers, Inc., 692 F.2d 1153, 1156-57 (8th Cir.1982); Morton Buildings of Nebraska, Inc. v. Morton Buildings, Inc., 531 F.2d 910, 916-17 (8th Cir.1976). Accord Victorian House, Inc. v. Fisher Camuto Corp., 769 F.2d 466, 469 (8th Cir.1985).

The district court analyzed the relationship between Hiebert and the representatives in light of the Morton Buildings and Green exception and found that the representatives never exceeded the scope of their authority and at all relevant times "were performing their normal duties within their authority for the benefit of Hiebert." Pink Supply Corp. v. Hiebert, Inc., 612 F.Supp. 1334, 1340 (D.Minn.1985). Our review of the record has revealed no evidence to the contrary.

On appeal, Pink Supply contends that the district court erred in two respects. Appellant first urges that the evidence sufficiently raised an issue of fact regarding whether the representatives were acting for their own benefit in recommending appellant's termination as a Hiebert dealer.

Pink Supply had ignored Michael Ketchum's suggestion to Robert Wernick, appellant's president, that a particular project, the First Bank of Ridgedale contract, was a "Dayton's spec." Dayton's, a major Hiebert dealer in competition with Pink Supply, had invested several years of design and sales efforts in the bank project but lost the contract to Pink Supply's lower bid. Appellant's theory is that Ketchum sought Pink Supply's termination in an effort to control dealer pricing and in order to protect his credibility in the marketplace.

On the issue of dealer pricing, however, appellant offered no evidence suggesting a personal benefit to Ketchum or his companies from appellant's adherence to particular resale price levels or any economic detriment to the representatives from appellant's price-cutting. Pink Supply and the representatives were not competitors. Moreover, as the district court noted, appellant's own employees testified that the appellees did...