Rosen v. Hyundai Group (Korea), CV 90-3674.

• Decision Date: 10 August 1993
• Docket Number: No. CV 90-3674.,CV 90-3674.
• Parties: Joseph ROSEN and Sandra McNeil, Plaintiffs, v. HYUNDAI GROUP (KOREA), Hyundai Corporation and Hyundai Piano; Samick (Korea), Samick (America) and Samick Music Corp., Defendants.
• Court: U.S. District Court — Eastern District of New York

829 F. Supp. 41

Joseph ROSEN and Sandra McNeil, Plaintiffs, v. HYUNDAI GROUP (KOREA), Hyundai Corporation and Hyundai Piano; Samick (Korea), Samick (America) and Samick Music Corp., Defendants.

No. CV 90-3674.

United States District Court, E.D. New York.

August 10, 1993.

COPYRIGHT MATERIAL OMITTED

Yannacone & Yannacone by Victor John Yannacone, Jr., Patchogue, NY, Thomas V. Dana, Co-Counsel, New York City, for plaintiffs.

Reid & Priest by Laura Longobardi, New York City, for defendant Hyundai.

Paul A. Batista, New York City, for defendant Samick Music Corp.

MEMORANDUM AND ORDER

WEXLER, District Judge.

Joseph Rosen, Sandra McNeil, Family Melody Center of Patchogue, Inc. and Schumann International Inc., (collectively "plaintiffs") distributed the Schumann brand piano manufactured by defendant Samick Musical Instruments Corporation ("SMIC") and sold to them by defendant Hyundai Corporation ("Hyundai") who acted as a middleman for plaintiffs and SMIC. Plaintiffs brought a slew of antitrust and state law claims stemming from their termination as a distributor of SMIC-manufactured pianos. Presently before the Court is defendants' motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the reasons stated below, defendants' motion for summary judgment with respect to plaintiffs' antitrust claims is granted. Additionally, summary judgment is also granted with respect to all state claims except plaintiffs' breach of warranty claim.

I. BACKGROUND

This is one of the many cases in which a terminated distributor of goods alleges a myriad of antitrust claims and state law based tort claims flowing from its termination. Unfortunately, plaintiffs' amended complaint and memorandum of law are rambling and disjointed, making it exceedingly difficult to decipher plaintiffs' claims.

Plaintiffs were involved in the wholesale distribution of pianos to dealers located in the United States. SMIC is a Korean Corporation that manufactures pianos.¹ Defendant Samick (USA) is a California corporation whose principal business is the wholesale distribution of SMIC-manufactured pianos under the trade name Samick. SMIC owns 80% of the shares of Samick (USA). The remaining 20% is owned by Kyo Chu, who is the president of Samick (USA) and one of the managing directors of SMIC.²

Hyundai is a large-scale Korean trading company. Defendant Hyundai (USA) is a wholly-owned subsidiary of the Hyundai Corporation that accepts orders from Hyundai's customers in the United States as well as parts of Latin and South America.³ From approximately 1979 until 1990, Hyundai acted as a middleman for plaintiffs and SMIC, purchasing SMIC-manufactured pianos under the trade name Schumann and reselling them to plaintiffs. Plaintiffs never entered into a written contract with Hyundai nor did plaintiffs have any contract with SMIC for a continuous supply of Schumann pianos. Indeed, plaintiffs had no direct dealings with SMIC whatsoever. In addition to its role as a middleman, Hyundai also purchased pianos from SMIC under the trade name Hyundai and distributed these pianos directly in the United States wholesale market.

The relationship between SMIC and plaintiffs was rocky from the outset. SMIC constantly threatened to terminate plaintiffs' supply of Schumann brand pianos and towards the end of the relationship broadcast its intent to terminate plaintiffs to dealers in the trade. It also appears that Hyundai attempted to convince SMIC on many occasions not to terminate plaintiffs, apparently because it was in Hyundai's economic interest to continue acting as a middleman for SMIC and plaintiffs.⁴ Additionally, plaintiffs also allege that large quantities of pianos were purposefully delivered in defective condition and that defendants failed to cure the defects.

In their complaint, plaintiffs allege that SMIC, Samick (USA), Hyundai and Hyundai (USA) entered into an agreement to terminate plaintiffs as distributors of the SMIC-manufactured Schumann brand piano because plaintiffs refused to raise their prices. SMIC contends that it unilaterally decided to terminate plaintiffs as part of its overall sales strategy. It claims that plaintiffs sold the Schumann pianos cheaply and as a result failed to provide its customers with any after-sales services. According to SMIC, people in the trade were aware that SMIC manufactured the Schumann brand pianos and SMIC was concerned that the reputation of its pianos would be injured as a result of plaintiffs' discounting.

Plaintiffs, on the other hand, claim that SMIC terminated them as distributors because of pressure placed upon it by Hyundai. Plaintiffs speculate that Hyundai, who competed against plaintiffs at the distributor level, pressured SMIC to terminate plaintiffs because plaintiffs refused to raise their prices. Plaintiffs suggest that Hyundai exercised control over SMIC because of its position as one of SMIC's largest customers. Plaintiffs further contend that Samick (USA) was also in favor of their termination because it too competed against plaintiffs at the distributor level.

In addition to the alleged price-fixing scheme, plaintiffs also allege that defendants unlawfully agreed to boycott plaintiffs, so that they could take over plaintiffs' customers and thereby increase their own profit. Plaintiffs also alleged a Robinson-Patman Act violation and monopoly claim which they withdrew at oral argument. Finally, in their complaint, plaintiffs allege a variety of state-law based torts. At oral argument they withdrew their common law monopoly claim, their prima facie tort claim, their refusal to deal claim, and their restraint on alienation claim. The remaining state claims are for unjust enrichment, joint venture, promissory estoppel, tortious interference with business relations and breach of warranty.

II. DISCUSSION

A. Federal Antitrust Claims

1. Section 1 Claims Vertical Price-Fixing Claim

Plaintiffs allege that the Hyundai defendants entered into an illicit price-fixing agreement with the Samick defendants in violation of § 1 of the Sherman Antitrust Act.⁵ Vertical price-fixing schemes are considered per se illegal under the antitrust laws. See Business Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 724, 108 S.Ct. 1515, 1519, 99 L.Ed.2d 808 (1988). In order to succeed on the merits of their claim, plaintiffs need only prove that the Hyundai defendants on the one hand and the Samick defendants on the other hand entered into an agreement to fix prices.⁶ Because vertical price-fixing is a per se violation of the antitrust laws, plaintiffs do not have to allege or show how the agreement adversely affected interbrand competition in the relevant product and geographic market.⁷

According to plaintiffs, Hyundai (USA) and Samick (USA) competed with them at the distributor level and were unhappy with plaintiffs' discounting. Thus, plaintiffs allege that Hyundai, who exercised economic power over Samick by virtue of its position as one of Samick's largest customers, coerced SMIC into terminating plaintiffs. Hyundai strenuously denies plaintiffs' assertion and suggests that contrary to plaintiffs' allegation, it attempted to convince SMIC to continue supplying pianos to plaintiffs. Indeed, Hyundai argues that it was to its economic benefit to continue acting as middleman for plaintiffs.⁸ Moreover, SMIC claims that it unilaterally decided to terminate plaintiffs. SMIC argues that plaintiffs' discounting was having a deleterious effect on its reputation in the industry. By failing to provide any after-sales services to its customers, SMIC argues that plaintiffs were undermining its sales plan of providing a top-notch product.

The Supreme Court has enunciated clear and stringent evidentiary standards for plaintiffs to show the required agreement under the antitrust laws. In order to survive a motion for summary judgment, plaintiffs must come forward with unambiguous evidence that the Samick defendants and the Hyundai defendants entered into an agreement to terminate plaintiffs and to sell their products thereafter at specific price levels. See Business Elecs. Corp., 485 U.S. at 726, 108 S.Ct. at 1520 (1988); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). Further, that evidence must tend to exclude the possibility that the Samick defendants and Hyundai defendants acted independently. See Matsushita, 475 U.S. at 588, 106 S.Ct. at 1356; Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764, 104 S.Ct. 1464, 1470, 79 L.Ed.2d 775 (1984). Plaintiffs have simply failed to meet this standard. The record in the present case is bereft of any evidence that tends to show any agreement on prices or price levels among defendants.

Defendants have met their initial burden of showing a lack of agreement between the defendants. The affirmative evidence indicates that there was clear disagreement between the Hyundai defendants and SMIC concerning plaintiffs. Indeed, the uncontroverted evidence in this case suggests that Hyundai opposed, not supported SMIC's decision to terminate plaintiffs. See Lim Dec. ¶¶ 11-16, 21-22, 24-25, 34, 36, 38, and Exhs. 2-3, 8-10, 14-15, 25, 28-29; Joo Dec. ¶¶ 17, 26. Plaintiffs have offered only sheer speculation to meet their burden to present evidence that shows an agreement or "that tends to exclude the possibility that the defendants acted independently." Thus, Rosen summarized his "evidence" that the Hyundai defendants agreed to fix prices with SMIC as follows:

I was threatened that, if I did not raise my prices, that Samick would discontinue my supply. This is what Hyundai told me. I have no way of knowing whether Hyundai — I have to assume at this point that Hyundai was involved in that also....

Rosen Dep. at 774 (emphasis added).

The apparent basis for plaintiffs' assumption that SMIC and Hyundai must have conspired is Rosen's speculation that Hyundai had sufficient economic...