Terry's Floor Fashions, Inc. v. Burlington Industries, Inc.
| Decision Date | 23 May 1985 |
| Docket Number | No. 83-1687,83-1687 |
| Citation | 763 F.2d 604 |
| Parties | 1985-1 Trade Cases 66,639 TERRY'S FLOOR FASHIONS, INC., Appellant, v. BURLINGTON INDUSTRIES, INC.; Lees Carpets, a Division of Burlington Industries, Inc.; and Eatman's Carpets, Inc., Appellees. |
| Court | U.S. Court of Appeals — Fourth Circuit |
William Woodward Webb, Raleigh, N.C. (Broughton, Wilkins & Webb, P.A., Raleigh, N.C., on brief), and Kevin P. Roddy, Charlottesville, Va., for appellant.
Daniel G. Clodfelter, Charlotte, N.C. (Joseph W. Eason, Raleigh, N.C., Hayden J. Silver, III, Moore, Van Allen & Allen, Charlotte, N.C., on brief), and Catherine B. Arrowood, Raleigh, N.C. (Robert W. Spearman, Steven Levitas, Sanford, Adams, McCullough & Beard, Raleigh, N.C., on brief), for appellees.
Before WINTER, HALL and SNEEDEN, Circuit Judges.
Plaintiff Terry's Floor Fashions, Inc. ("Terry's"), appeals from a judgment of the United States District Court for the Eastern District of North Carolina, James C. Fox, Judge, 568 F.Supp. 205 allowing the defendants' motions for summary judgment regarding the plaintiff's Sherman Act Sec. 1 claims, 15 U.S.C. Sec. 1; allowing defendant Lees' motion to dismiss a Robinson-Patman Act claim, 15 U.S.C. Sec. 13(a); and allowing the defendants' motions to dismiss pendent state law claims under the North Carolina Unfair Trade Practices Act, N.C.Gen.Stat. Secs. 75-1, -1.1, -2, -5, -7. The principal issue on appeal is whether the district court erred in allowing the defendants' motions for summary judgment on the Sherman Act Sec. 1 claims because of the plaintiff's failure to demonstrate the existence of a combination or conspiracy between the defendants. We agree with the district court that there was insufficient evidence to support an inference that the alleged conspiracy existed, and we therefore affirm the district court's judgment. We also affirm the judgment of the district court with regard to the Robinson-Patman Act claim and the pendent state law claims.
The plaintiff is a North Carolina corporation engaged in the business of selling and installing carpet and other floor coverings for residential and commercial purposes. The plaintiff's business is primarily located in Cary, North Carolina. The defendants are Eatman's Carpets, Inc. ("Eatman's"), a North Carolina corporation also engaged in the sale and installation of residential and commercial carpeting, and Lees Carpets ("Lees"), a division of Burlington Industries, Inc., a manufacturer of residential and commercial grade carpet. Terry's and Eatman's were competitors in sales of Lees carpets and remain competitors in selling carpets made by other manufacturers. Eatman's is located in Raleigh, North Carolina.
Eatman's began doing business with Lees in 1970, as a dealer of both residential and commercial grade carpet. Terry's began selling Lees' products in 1975. From 1975 to 1977, Terry's primarily sold Lees' residential line of carpeting. In 1977, however Terry's began to purchase and sell, in addition to residential carpeting, small amounts of Lees' commercial grade carpeting. At no time, however, did Lees regard Terry's as one of its principal commercial dealers, a status enjoyed by Eatman's and one which entitled Eatman's to a discount on Lees products. In mid-1980, Terry's, desirous of obtaining similar discounts to those given Eatman's, asked to become a principal commercial dealer for Lees. Lees informed Terry's that it did not wish to program Terry's as a principal commercial dealer and that it preferred to continue concentrating its commercial carpet sales through Eatman's. From that point on, relations deteriorated; and in February 1981, Lees terminated its business relationship with Terry's.
Terry's filed suit on July 9, 1981, alleging violations of various state and federal antitrust laws. In its second amended complaint, Terry's alleged the following: (1) that Lees and Eatman's combined and conspired in violation of Section 1 of the Sherman Act, 15 U.S.C. Sec. 1; (2) that Eatman's had attempted to monopolize the relevant market, defined in the complaint, in violation of Section 2 of the Sherman Act, 15 U.S.C. Sec. 2, and that Lees had conspired with Eatman's in the alleged attempted monopolization; (3) that Lees had engaged in unlawful price discrimination in violation of the Robinson-Patman Act, 15 U.S.C. Sec. 13(a), and that Eatman's had knowingly induced and received such price discrimination in violation of 15 U.S.C. Sec. 13(f); and (4) that the defendants' actions also constituted violations of the North Carolina Unfair Trade Practices Act, Secs. 75-1, -1.1, -2, -5, -7. Lees filed a counterclaim for $7,857.60, the price of carpet which Terry's had purchased from Lees, but for which Terry's had not paid.
As indicated above, the district court granted the defendants' motions for summary judgment on the Sherman Act Sec. 1 claims because of the plaintiff's failure to produce sufficient evidence of a conspiracy. The district court also granted the defendants' motions for summary judgment regarding the plaintiff's Sherman Act Sec. 2 claims. 1 The court granted Lees' motion to dismiss, pursuant to F.R.Civ.P. 12(b)(6), Terry's claim of price discrimination in violation of Section 2(a) of the Robinson-Patman Act. 2 The Court further granted defendants' motions to dismiss various pendent state law claims. Finally, the district court granted Lees' motion for summary judgment regarding its counterclaim.
As the district court accurately observed, "the record reveals a vigorous and highly competitive industry at all levels." Terry's Floor Fashions v. Burlington Industries, 568 F.Supp. 205, 208 (E.D.N.C.1983). There are a large number of companies which manufacture residential and commercial grade carpet. The record indicates, for example, that Terry's purchased carpet not only from Lees, but also from Trend Carpets, Armstrong, Stratton, J & J Carpets, J.P. Stevens, Evans & Black, and others.
There are numerous carpet dealers in the market as well. Terry's and Eatman's, for example, were among forty-two authorized distributors of Lees carpet in eastern North Carolina. Eatman's was also one of several large commercial dealers for Lees in the eastern North Carolina area. Others with a sales volume comparable to that of Eatman's included Educational Equipment Company located in Raleigh, Monnett's Carpets & Draperies in Greensboro, and Style Perfect Furniture Galleries in Winston-Salem. Joint Appendix at 216.
Lees distributes its carpeting through a system of sales territories throughout the United States. Lees assigns a sales representative to each territory. These territories are not exclusive for distributors, and each Lees sales representative is responsible for developing a network of dealers in his territory. North Carolina is divided into two territories, with both Eatman's and Terry's in the territory covering eastern North Carolina. The Lees sales representative for this territory during the period of time relevant to this suit was John Cummings.
In the carpet industry, there are two broad categories of carpet--residential grade and commercial grade carpet. Residential grade carpet, generally heavier and less densely woven or tufted, is sold primarily for use in homes or for smaller commercial applications. Commercial carpet, lighter weight and more densely woven, is obviously designed to withstand much heavier use. One of the major differences between the two types of carpeting, however, is the manner in which they are marketed. Residential grade carpet is usually sold through retail stores or to building contractors. A dealer in the residential carpet market must, therefore, devote significant resources to media advertising and to a showroom.
Commercial grade carpet, on the other hand, is generally sold through a competitive bidding process. Dealers in the commercial carpet market must engage in intensive sales work with architects, contractors, and purchasing agents in order to persuade them to specify or accept Lees carpet for a particular bid. While the Lees sales representative for that territory does some of this work, Lees relies to a great extent on its commercial dealers. Personal contacts, quality of installation, and reliability of service are much more important in the commercial market than in the residential market. Because the manufacturer's reputation is more visibly at stake in the larger commercial jobs, the manufacturer is very interested in the accountability of his commercial dealers and in the dealer's own reputation for reliability and service.
The selection of dealers for a particular territory is made by the Lees sales representative in consultation with his superiors. 3 Lees does not, however, regard all its dealers to be equally as capable as other dealers. This is particularly true with regard to commercial carpet dealers because of the importance of personal contacts and professional reputation. Lees, therefore, selects some dealers through whom it concentrates its marketing of a particular line of Lees carpeting. That selection is based on an assessment of which dealers are most willing to and capable of effectively promoting Lees products. Incentives are given to these selected dealers, usually in the form of price, to encourage them to market Lees carpeting aggressively.
The giving of such incentives is necessitated by the nature of the carpet industry. Carpet dealers, including both Terry's and Eatman's, are normally authorized dealers for a number of manufacturers. The products of these numerous manufacturers are often interchangeable, and the purchaser of the carpet does not usually specify that only one brand may be used. Some incentive is necessary, therefore, to encourage a particular dealer to promote and bid one manufacturer's product over that of another manufacturer. Thus, Lees' marketing...
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