Southern Concrete Co. v. U.S. Steel Corp.

• Citation: 535 F.2d 313
• Decision Date: 19 July 1976
• Docket Number: No. 75-2987,75-2987
• Parties: 1976-2 Trade Cases 60,981 SOUTHERN CONCRETE COMPANY, Plaintiff-Appellant, v. UNITED STATES STEEL CORPORATION et al., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 313

535 F.2d 313

1976-2 Trade Cases 60,981

SOUTHERN CONCRETE COMPANY, Plaintiff-Appellant, v. UNITED STATES STEEL CORPORATION et al., Defendants-Appellees.

No. 75-2987.

United States Court of Appeals, Fifth Circuit.

July 19, 1976.

John H. Boone, San Francisco, Cal., John V. Skinner, Jr., Earl B. Benson, Jr., A. Mims Wilkinson, Jr., Atlanta, Ga., for plaintiff-appellant.

Curtis L. Frisbie, Jr., Joseph R. Gladden, Jr., Charles H. Kirbo, Atlanta, Ga., for defendants-appellees.

Appeal from the United States District Court for the Northern District of Georgia.

Before GEWIN and AINSWORTH, Circuit Judges, and MARKEY ^*, Chief Judge.

GEWIN, Circuit Judge:

In this private antitrust suit Southern Concrete Company, plaintiff below, appeals from a partial grant of summary judgment in favor of defendant-appellee United States Steel Corporation. From the late 1950's until 1969 appellant Southern Concrete was engaged in the manufacture and sale of ready-mix concrete in the Atlanta metropolitan area; it is now defunct. Appellee United States Steel Corporation, through its Universal Atlas Cement Division (hereinafter United States Steel), is a supplier of cement, a major ingredient of ready-mix concrete, in the Atlanta area. In 1965 the principals of Williams Brothers Lumber Company, a building supplies business, decided to enter the expanding ready-mix concrete business in Atlanta. Upon learning this, United States Steel contacted Williams Brothers to solicit its business.

Thereafter, on three occasions from 1965 through 1967, an Atlanta bank, Trust Company of Georgia, loaned over $1.25 million to Williams Brothers on favorable terms; United States Steel agreed to serve as guarantor on each of Williams Brothers' three notes to the bank. These loan guarantees were secured by rights of first refusal to purchase the stock of Williams Brothers. These rights of first refusal remained in effect only while there were outstanding balances on the loans. Williams Brothers repaid each of the three loans, and United States Steel never acquired or purchased any Williams Brothers stock. In addition, on one occasion in 1969 United States Steel made a direct loan to Williams Brothers, which the latter repaid. Williams Brothers bought almost all of its cement requirements from United States Steel. Southern Concrete did not purchase any cement from United States Steel within the period here involved and never manufactured or sold cement in competition with United States Steel. Williams Brothers' cement business prospered and expanded; Southern Concrete on the other hand, went out of business in 1969.

In 1971 Southern Concrete instituted this antitrust action against both United States Steel and Williams Brothers ¹, at whose feet Southern Concrete would lay the blame for its demise. The favorable financing which United States Steel had been able to arrange, Southern Concrete contended, had enabled Williams Brothers to undersell its competitors and force them out of business. The complaint set forth a plethora of alleged antitrust violations ² by the two defendants including the following, the only claims involved in this appeal:

1. A tying arrangement violative of section 1 of the Sherman Act, 15 U.S.C. § 1. Southern Concrete alleged that United States Steel had granted loan guarantees (the alleged tying product) to Williams Brothers conditioned upon Williams Brothers' agreement to purchase cement (the alleged tied product). ³

2. An exclusive dealing arrangement violative of section 3 of the Clayton Act, 15 U.S.C. § 14. Southern Concrete asserted that United States Steel had sold cement to Williams Brothers on the condition that Williams Brothers purchase all its cement requirements from United States Steel.

3. A reciprocal dealing arrangement violative of section 1 of the Sherman Act. Southern Concrete alleged that United States Steel had agreed to guarantee loans to Williams Brothers if the latter would agree to purchase cement.

4. A reciprocal dealing arrangement violative of section 1 of the Sherman Act. Southern Concrete alleged that United States Steel had agreed to provide Williams Brothers the services of one of its employees (a cement technician), if Williams Brothers would provide United States Steel with storage facilities.

After more than three years of discovery, United States Steel moved for partial summary judgment with respect to some of the claims asserted by Southern Concrete including, inter alia, the four aforementioned alleged violations of section 1 of the Sherman Act and section 3 of the Clayton Act. For purposes of this motion, and on this appeal, United States Steel assumes arguendo that the alleged violations had occurred; it argues, however, that Southern Concrete lacks standing under the provisions of section 4 of the Clayton Act to assert these four claims. The trial court agreed and granted the motion for partial summary judgment on these claims. The exhaustive opinion of the district court is reported at 394 F.Supp. 362 (N.D.Ga.1975). On the bulk of its claims, however, Southern Concrete had a jury trial. After a trial lasting approximately three weeks, the jury found in favor of United States Steel and against Southern Concrete on every issue. ⁴ Southern Concrete has not appealed from the adverse jury findings. Rather, the only issue before us on this appeal is whether the court erred in granting United States Steel's motion for summary judgment on the four claims of reciprocal dealings, exclusive dealings, and a tying arrangement. We affirm.

Section 4 of the Clayton Act, 15 U.S.C. § 15 provides:

Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States . . .

Although the statute contains no language of limitation, the Supreme Court has recognized that

(t)he lower courts have been virtually unanimous in concluding that Congress did not intend the antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation.

Hawaii v. Standard Oil Co., 405 U.S. 251, 263, 92 S.Ct. 885, 891, 31 L.Ed.2d 184, 193 n. 14 (1973) (citations omitted). To establish that he has been injured "by reason of" an antitrust violation within the meaning of section 4, the private antitrust plaintiff must show that he was within the "target area" of the alleged violation. That is, he must "show himself within the sector of economy in which the violation threatened a breakdown of competitive conditions." Jeffrey v. Southwestern Bell, 518 F.2d 1129 (5th Cir. 1975); Battle v. Liberty Nat'l Life Ins. Co., 493 F.2d 39, 49 (5th Cir. 1974), cert. denied, 419 U.S. 1110, 95 S.Ct. 784, 42 L.Ed.2d 807 (1975); Dailey v. Quality School Plan, Inc., 380 F.2d 484, 487 (5th Cir. 1967).

To determine whether a particular plaintiff meets the "target area" test for standing, it is necessary to examine the nature of the specific antitrust violations of which he complains and to ascertain what areas of the economy would be affected thereby. Southern Concrete alleged a tying agreement and reciprocal dealings violative of Section 1 of the Sherman Act, and exclusive dealings violative of Section 3 of the Clayton Act. A tying arrangement 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 . . . ." Northern Pac. Ry. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545, 550 (1958). The evil inherent in an illegal tie-in "is the fact that the agreement or the effect thereof lessens competition in the tied product." David R. McGeorge Car Co. v. Leyland Motor Sales, Inc., 504 F.2d 52, 58 (4th Cir. 1974), cert. denied, 420 U.S. 992, 95 S.Ct. 1430, 43 L.Ed.2d 674 (1975). See also Times Picayune Publishing Co. v. United States,345 U.S. 594, 614, 73 S.Ct. 872, 883, 97 L.Ed. 1277, 1293 (1953) ("The common core of the adjudicated unlawful tying arrangement is the forced purchase of a second distinct commodity with the desired purchase of a dominant 'tying' product, resulting in economic harm to competition in the 'tied' market.") (emphasis added); Wendkos v. ABC Consol. Corp., 379 F.Supp. 15, 17 (E.D.Pa.1974). The anti-competitive effects of tying agreements are two-fold: "they may force (the party subject to the tie) into giving up the purchase of substitutes for the tied product, . . . and they may destroy the free access of competing suppliers of the tied product to the consuming market." United States v. Loew's, Inc., 371 U.S. 38, 45, 83 S.Ct. 97, 102, 9 L.Ed.2d 11, 18 (1962). Consequently, the area of the economy threatened with a breakdown of competitive conditions because of a tying agreement is the market for the tied product; and those who will be proximately injured thereby in addition to the party subject to the tie are competitors in the tied product.

In the case before us the alleged "tied" product is cement, which Williams Brothers was purportedly forced to buy from United States Steel. Southern Concrete did not sell cement; it sold ready-mix concrete. Moreover, Southern Concrete did not purchase cement from United States Steel. Thus, even if there did exist a tying agreement obligating Williams Brothers to buy cement from United States Steel, it neither restricted the market for Southern Concrete's product, ready-mix concrete, nor confined Southern Concrete's sources of supply for cement.

In Holleb & Co. v. Produce Terminal Cold Storage Co., 5 CCH Trade Reg. Rep. P 60,436 (N.D.Ill.1975), the court confronted an analogous situation. Holleb, a distributor of frozen foods, alleged that Produce Terminal, a competing distributor, had engaged in an illegal tying agreement by refusing to purchase the products of a frozen food producer that did not store its products in Produce Terminal's public frozen food warehouse facilities (the "tied product"). The court found no evidence of a...