RCM Supply Co., Inc. v. Hunter Douglas, Inc.

• Decision Date: 07 September 1982
• Docket Number: No. 81-1662,81-1662
• Citation: 686 F.2d 1074
• Parties: 1982-2 Trade Cases 64,925 RCM SUPPLY COMPANY, INC., Appellee, v. HUNTER DOUGLAS, INC., a Delaware Corporation, Hunter Douglas, NV, a Netherlands Antilles Corporation, Appellants, and Whittaker Corporation, Defendant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1074

686 F.2d 1074

1982-2 Trade Cases 64,925

RCM SUPPLY COMPANY, INC., Appellee, v. HUNTER DOUGLAS, INC., a Delaware Corporation, Hunter

Douglas, NV, a Netherlands Antilles Corporation, Appellants,

and

Whittaker Corporation, Defendant.

No. 81-1662.

United States Court of Appeals, Fourth Circuit.

Argued Feb. 3, 1982.

Decided Sept. 7, 1982.

Victor S. Friedman, New York City (William M. Pinzler, Eric H. Queen, Fried, Frank, Harris, Shriver & Jacobson, New York City, Thomas D. Washburne, Ober, Grimes & Shriver, Baltimore, Md., on brief), for appellants.

Paul V. Niemeyer, John E. Griffith, Jr., William L. Marbury, Piper & Marbury, Baltimore, Md. (Leonard R. Goldstein, Goldstein & Ahalt, College Park, Md., Chartered, on brief), for appellee.

Before BRYAN, Senior Circuit Judge, and RUSSELL and SPROUSE, Circuit Judges.

ALBERT V. BRYAN, Senior Circuit Judge:

Attacked by this appeal is a judgment for $4,268,627.00, awarded for injuries resulting from an alleged violation of the Federal antitrust laws and the common law of Maryland. Our inspection of the briefs and record in this singularly complex case discloses certain infirmities fatal to the judgment. We therefore reverse.

I. Facts

The principal parties in this litigation are three corporations: Hunter Douglas, N.V. (HDNV), a multinational corporation based in the Netherlands; Hunter Douglas, Inc. (HDI), the wholly owned American subsidiary of HDNV; and RCM Supply Co. (RCM), a Maryland corporation which has been reorganized under Chapter 11 of the new bankruptcy act, 11 U.S.C. § 101 et seq.

Prior to 1976, RCM was engaged in the business of applying aluminum siding to new and existing homes, purchasing its siding materials exclusively from the Crown Aluminum Division (Crown) of Whittaker Corporation of Durham, North Carolina. RCM operated solely in the metropolitan Washington, D. C., area where the "Williamsburg colors" featured by Crown were especially popular. In February 1977, Whittaker sold the Crown operation to HDNV, who placed it under the auspices of HDI.

By early 1976 RCM decided to expand its operation and become a distributor of siding materials to other appliers. A Crown franchise was sought and obtained, requiring RCM to build a warehouse and otherwise expand its operation to accommodate the additional stock of siding necessary to operate a distributorship. RCM claims that Crown officials orally promised to provide it with a distributor's "lowest price" discount on all purchases and an unspecified amount of credit, labelled "trade support," for making such purchases.

During the year following HDI's acquisition of Crown, RCM expanded its line of sidings by offering the products of Revere Aluminum Building Products, Inc. (Revere). RCM avers that HDI viewed this action as a display of disloyalty. After failing to discourage RCM from dealing with Revere, HDI allegedly pursued a successful course of action designed to ruin RCM's business and force it into bankruptcy. This undertaking is said to have included, inter alia (1) breaching the agreement to provide RCM with lowest prices and trade support, and (2) stealing RCM's customers by offering them distributor's prices despite their failure to meet the established prerequisites for that privilege.

RCM commenced this litigation May 2, 1980, in the Federal District Court for Maryland, naming HDNV and HDI as defendants. ¹ Of the divers claims alleged in the complaint, the following were submitted to the jury via special interrogatories:

(1) an attempt to monopolize the metropolitan Washington siding market in violation of § 2 of the Sherman Act, 15 U.S.C. § 2.

(2) a breach of the oral promise, upon which RCM detrimentally relied;

(3) malicious interference with business relations, a Maryland common law tort;

(4) wrongful use of trade secrets, another State tort; and

(5) commercial slander, also a Maryland tort claim.

The jury was further permitted to consider an award of punitive damages against both defendants for the actions constituting the three torts.

The jury found in favor of RCM on all of the enumerated claims and assessed an additional award as punitive damages, the total of the verdict being $4,548,525.00. Responding to the defendants' motion for judgment n.o.v. or a new trial, the trial judge struck the jury's verdict for RCM on the tort claims for wrongful use of a trade secret and commercial slander. As the punitive damages applied to all three torts without distinction, that award was reduced by two-thirds to compensate for the stricken claims. In all other respects, final judgment, totalling $4,268,627.00, was entered in accordance with the verdict. The particulars of the jury's award and the District Court's adjustments are set forth in the margin. ² RCM has not appealed any of the rulings adverse to them.

II. Antitrust Claim

HDI raises a variety of challenges to the judgment for attempt to monopolize the Washington siding market. We need to consider but one of these assignments of error, for we hold that RCM failed to produce evidence restricting the relevant geographic market to the metropolitan Washington area. ³

To establish an actionable attempt to create a monopoly, a plaintiff must define the contours of the market place subject to monopolization. In particular, the market must be delineated with respect to the relevant product and geographic area affected. See generally II P. Areeda & D. Turner, Antitrust Law P 517 (1978). The standard for determining the relevant geographic market in disputes between buyers and sellers of supplies, announced in Tampa Electric Co. v. Nashville Co., 365 U.S. 320, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961), was paraphrased aptly in the District Court's charge to the jury in the instant case: ⁴

(y)ou must consider that the geographic market should consist of an area in which the Defendants operate and which the Plaintiff can reasonably turn to for supplies. If you determine that, as a practical matter, RCM can only turn for supplies or purchase their relevant markets (sic) in the so-called Washington market, then that market is the geographic market for Section 2 purposes. On the other hand, if you determine that RCM could turn for supplies in an area broader than the Washington market, then the larger market would be the geographic market for Section 2 purposes. In determining what is the area in which RCM can practically turn for supplies, you should consider whether there are any differences in transportation costs, distribution facilities, customer inventory or any other factor that would cause the Plaintiff to turn to the suppliers solely within the so-called twenty county area. (Accent added)

Thus instructed, the jury was tendered an interrogatory asking it to set the relevant geographic market as either the United States east of the Mississippi River or the metropolitan Washington area; the latter was selected. This conclusion, however, is contradicted by RCM's own admissions; it could and did obtain supplies from outside metropolitan Washington. HDI's siding was shipped from Durham, North Carolina, and Revere products originated in Chicago. Other suppliers approached by RCM as potential replacements for HDI were located in Pittsburgh and Detroit. In fact, to meet the rigors of competition in the siding industry, any supplier would assume the expense of shipping its products to Washington.

We cannot accept RCM's explanation that the outside distributors would not sell their products in Washington unless they had access to a warehouse in the area. Assuming the truth of that proposition, the simple fact is that RCM owned a warehouse which both HDI and Revere considered adequate for shipping their products to RCM from without the Washington area. Absent any support in the record, we cannot presume that other potential suppliers would be unwilling to accept RCM as a distributor of their products. As RCM has failed to prove a necessary element of its antitrust claim, its judgment on that count cannot stand.

III. Malicious Interference with Business Relations

HDI next assails the thoroughness of the District Court's instruction of the jury regarding this claim. That charge reads:

To find that the defendant maliciously interfered with the Plaintiff's business relations, the Plaintiff must prove ... four elements ... by a preponderance of the evidence. First, that the Defendant willfully and intentionally acted. Second, that those willful and intentional acts were calculated to cause damage to the Plaintiff in its lawful business pursuits. Thirdly, that those acts were done with the unlawful purpose of causing loss or damage to the Plaintiff's business and undertaken without just cause. And fourth, that the Plaintiff was directly damaged by that activity.

As this claim arises in the pursuit of RCM's former customers by HDI, it contends that the District Court should have instructed the jury that such behavior, if in the course of commercial competition, is privileged. We agree.

The trial court's instruction is taken, without material alteration, from two Maryland cases on interference with prospective contractual relations. Beane v. McMullen, 265 Md. 585, 603, 291 A.2d 37, 47 (1972); Willner v. Silverman, 109 Md. 341, 355, 71 A. 962, 964 (1909). Neither of those cases, however, involved disputes between competitors. ⁵ When a plaintiff alleges that a competitor has interfered with a potential business relation, the latter's actions are protected by a competitive privilege under the law of Maryland unless certain exceptions are found applicable.

When B is legally free to deal either with C or with A, the privilege of competition implies a privilege on the part of A to induce B to deal with him rather than with C.

Horn v. Seth, 201 Md. 589, 593, 95 A.2d 312, 314 (1953), (quoting Restatement of Torts § 768(i) (1934); accord, Goldman v. Harford Road Building Association, 150 Md. 677, 685, 133 A. 843, 845 (1926); Restatement (Second...