Ransomes America Corp. v. SPARTAN DISTRIBUTORS, 1:95-CV-123.

• Decision Date: 18 January 1996
• Docket Number: No. 1:95-CV-123.,1:95-CV-123.
• Citation: 914 F. Supp. 183
• Parties: RANSOMES AMERICA CORPORATION, a Delaware corporation, Plaintiff and Counter-Defendant, v. SPARTAN DISTRIBUTORS, INC., a Michigan corporation, Defendant and Counter-Plaintiff.
• Court: U.S. District Court — Western District of Michigan

914 F. Supp. 183

RANSOMES AMERICA CORPORATION, a Delaware corporation, Plaintiff and Counter-Defendant, v.SPARTAN DISTRIBUTORS, INC., a Michigan corporation, Defendant and Counter-Plaintiff.

No. 1:95-CV-123.

United States District Court, W.D. Michigan, Southern Division.

January 18, 1996.

Daniel J. La Fave, Kathleen S. Donius, Reinhart, Boerner, Van Deuren, Norris & Rieselbach, S.C., Milwaukee, WI, Frederick D. Dilley, Boyden, Waddell, Timmons & Dilley, Grand Rapids, MI, for plaintiff.

Jon G. March, Miller, Johnson, Snell & Cummiskey, Grand Rapids, MI, for defendant.

OPINION OF THE COURT

McKEAGUE, District Judge.

This is fundamentally an action for declaratory judgment.PlaintiffRansomes America Corporation("RAC") seeks declaration that the February 1995 termination of its dealer agreement with defendantSpartan Distributors, Inc.("Spartan") was lawful.Spartan has responded with a three-count counterclaim.Now before the Court is RAC's motion to dismiss and for summary judgment challenging counts I and II of the counterclaim.

I.

RAC manufactures and/or sells Ransomes, Cushman and Ryan professional lawn maintenance products.For many years, Spartan, a retail distributor and dealer of lawn and turf care products, had sold RAC products in Western Michigan; in particular, Cushman and Ryan products.Spartan is also a Toro distributor, selling a complete line of Toro turf maintenance products.The relationship between RAC and Spartan had been governed most recently by a Master Dealer Agreement entered into in February 1993.In December 1994, RAC gave notice of its unilateral decision to terminate the relationship in accordance with the agreement's termination provisions, effective February 2, 1995.An undisputed reason for RAC's decision was Spartan's refusal to sell Ransomes reel and rotary mowers.It appears RAC had wanted Spartan to sell Ransomes products, in addition to the Cushman and Ryan products it had been selling, so as to market a full range of RAC turf maintenance and utility products, and enable RAC to better compete with its main competitors, Toro and Jacobsen.When Spartan objected to the termination and threatened to sue, RAC commenced this action for declaratory judgment.

In count I of its counterclaim, Spartan alleges the termination violates Michigan's statute regulating dealings between motor vehicle manufacturers, dealers and distributors, M.C.L. § 445.1561 et seq., in that it was not based upon good cause and was not attended by proper notice.Count II asserts an antitrust claim alleging the termination is premised on an agreement, combination or conspiracy in restraint of trade, in violation of the Sherman Act,15 U.S.C. § 1.In count III, Spartan alleges that even if the relationship is deemed to have been terminable at will, it is entitled to recoup overhead costs incurred in handling distribution of the RAC product line.

II.

RAC challenges the count II antitrust claim under Fed.R.Civ.P. 12(b)(6), contending it fails to state a valid claim.The Court is obliged to construe the complaint liberally in Spartan's favor and accept as true all well-pleaded factual allegations.Gazette v. City of Pontiac,41 F.3d 1061, 1064(6th Cir.1994).The motion to dismiss may be granted only if it appears beyond doubt that Spartan can prove no set of facts in support of its claim that would entitle it to relief.Id.;Cameron v. Seitz,38 F.3d 264, 270(6th Cir.1994).

Spartan alleges RAC's requirement that it purchase Ransomes mowers in order to be able to purchase other RAC products affects a substantial volume of interstate traffic, adversely affects competition, and is an unlawful restraint of trade.RAC characterizes Spartan's claim as one alleging an illegal "tying arrangement," that is, "an agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product."Smith Machinery Co., Inc. v. Hesston Corp.,878 F.2d 1290, 1294(10th Cir.1989), cert. denied,493 U.S. 1073, 110 S.Ct. 1119, 107 L.Ed.2d 1026(1990), quotingNorthern Pac. Ry. Co. v. United States,356 U.S. 1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545(1958)."Certain tying arrangements pose an unacceptable risk of stifling competition and therefore are unreasonable `per se.'"Smith Machinery, supra, at 1295, quotingJefferson Parish Hospital Dist. No. 2 v. Hyde,466 U.S. 2, 9, 104 S.Ct. 1551, 1556, 80 L.Ed.2d 2(1984).However, RAC argues, the instant tying arrangement is in the nature of "line forcing,""whereby a manufacturer agrees to license or franchise a dealer to sell its products, but only on condition that the dealer sell a full or representative line of those products."Smith Machinery,at 1295.Line forcing is said to be a "vertical nonprice restraint" — an agreement between entities at different levels of distribution that does not purport to affect prices charged for goods" — that is not illegal per se because it is not manifestly anticompetitive.Id;see alsoRoy B. Taylor Sales, Inc. v. Hollymatic Corp.,28 F.3d 1379, 1383(5th Cir.1994).

Tying arrangements that constrain only dealers are not presumptively illegal because they pose little danger to competition, as long as consumers may purchase the two goods separately.Id.Such tying arrangements may be illegal under § 1 of the Sherman Act, but they are not presumptively so, and it is incumbent upon the plaintiff, under "the Rule of Reason," to plead and show that the challenged arrangement has an "actual adverse effect on competition."Smith Machinery,at 1298, quotingJefferson Parish, supra,466 U.S. at 29, 31, 104 S.Ct. at 1567, 1568.This, RAC contends, Spartan has not done and cannot do.

Spartan has failed to persuasively rebut the above arguments.In support of its position that a tying arrangement imposed by a manufacturer upon a dealer is properly subject to "per se analysis," Spartan relies on an unpublished opinion from the Ninth Circuit, Western Power Sports, Inc. v. Polaris Industries Partners, L.P.,951 F.2d 365(Table), 1991 WL 266523(9th Cir.1991), cert. denied,506 U.S. 821, 113 S.Ct. 70, 121 L.Ed.2d 36(1992).In Western Power Sports,the court reversed an award of summary judgment to the defendant manufacturer, applying per se analysis and finding genuine issues of material fact.The distinction between tying arrangements that constrain only dealers and those that constrain consumers appears not to have been raised and was not addressed by the court.The reasoning of the Western Power Sports opinion is summary in nature and not persuasive in the face of the more thorough analysis contained in Smith MachineryandTaylor Sales, supra.Moreover, Sixth Circuit cases recognizing that other kinds of vertical nonprice restrains are subject not to per se analysis, but to rule of reason analysis, indicate the Sixth Circuit will follow the lead of Smith Machinery and Taylor Sales.SeeInt'l Logistics Group v. Chrysler Corp.,884 F.2d 904, 906-07(6th Cir.1989);Crane & Shovel Sales Corp. v. Bucyrus-Erie Co.,854 F.2d 802, 805-06(6th Cir.1988).

Accordingly, the Court concludes count II does not set forth a cause of action giving rise to a presumption that trade and competition have been unlawfully restrained by the alleged tying arrangement.In the absence of such a presumption, Spartan must affirmatively plead anticompetitive effect as an essential element of a rule of reason claim.

Spartan maintains that its general allegations are sufficient to withstand Rule 12(b)(6) scrutiny.Yet, while Spartan has alleged that RAC's arrangement adversely affects competition, such a bald, conclusory allegation is insufficient."The essential elements of a private antitrust claim must be alleged in more than vague and conclusory terms to prevent dismissal of the complaint on a defendant's 12(b)(6) motion."Crane & Shovel Sales, supra,854 F.2d at 805, 810;see alsoRe/Max Int'l v. Realty One, Inc.,900 F.Supp. 132, 150(N.D.Ohio1995)("insufficient allegations of anticompetitive effect will justify dismissal of a § 1 antitrust claim").

The allegations of count II thus fail to state either a valid "per se" claim or a valid "rule of reason" claim.RAC's motion to dismiss will be granted.¹

III.

With respect to Spartan's count I claim, asserting violations of Michigan's motor vehicle dealer protection statute, RAC moves for summary judgment under Fed.R.Civ.P. 56.The motion requires the Court to look beyond the pleadings and evaluate the facts to determine whether there is a genuine issue of material fact that warrants a trial.See generallyBarnhart v. Pickrel, Schaeffer & Ebeling Co.,12 F.3d 1382, 1388-89(6th Cir.1993).An issue of fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmovant.Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202(1986).An issue of fact concerns "material" facts only if establishment thereof might affect the outcome of the lawsuit under governing substantive law.Id.A complete failure of proof concerning an essential element of plaintiff's case necessarily renders all other facts immaterial.Celotex Corp. v. Catrett,477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265(1986).

RAC contends there is no genuine issue of material fact and that it is entitled to summary judgment because Spartan is not a motor vehicle dealer subject to the Michigan statute's protections.Spartan disagrees.

Among the RAC products sold by Spartan were utility vehicles known as the Cushman Turf-Truckster.Spartan sold several models of the Turf-Truckster; three-and four-wheel versions, gasoline and electric powered.Spartan contends the Turf-Truckster is a "self-propelled device in, upon or by which any person or property is or may be transported or drawn upon a highway," and thus satisfies the definition of a motor vehicle under the Michigan Vehicle Code,M.C.L. §§ 257.33,257.79.Inasmuch as this...