THE IN PORTERS, SA v. Hanes Printables, Inc.

• Decision Date: 11 June 1987
• Docket Number: No. C-86-956-WS.,C-86-956-WS.
• Citation: 663 F. Supp. 494
• Court: U.S. District Court — Middle District of North Carolina
• Parties: THE `IN' PORTERS, S.A., Plaintiff, v. HANES PRINTABLES, INC., and Sarah Lee Corporation, Defendants.

663 F. Supp. 494

THE `IN' PORTERS, S.A., Plaintiff, v. HANES PRINTABLES, INC., and Sarah Lee Corporation, Defendants.

No. C-86-956-WS.

United States District Court, M.D. North Carolina, Winston-Salem Division.

June 11, 1987.

Randolph M. James, Winston-Salem, N.C., for plaintiff.

J. David Mayberry, George L. Little, F. Joseph Treacy, Jr., and Rodrick J. Enns, Winston-Salem, N.C., for defendants.

MEMORANDUM OPINION

GORDON, Senior District Judge:

Plaintiff brings antitrust, unfair trade, contract, and interference with contract claims. Defendant moves to dismiss. The court dismisses the antitrust claim for a lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1) and the unfair trade claims for a failure to state a claim under Fed.R.Civ.P. 12(b)(6). The court retains the contract and interference with contract claims.

FACTS¹

Defendant Sarah Lee, a Maryland corporation with its principal place of business in Illinois, owns all of the stock of defendant Hanes Printables. Defendant Hanes Printables ("Hanes"), a Delaware corporation with its principal place of business in North Carolina, manufactures and exports fashion outerwear through its foreign subsidiary, Hanes International, to distributors in Europe. Hanes International, a Belgian corporation, is not a named party in this case. Plaintiff `In' Porters, a French corporation, distributes imported Hanes outerwear to retailers in France.

Plaintiff began buying goods directly from Hanes in early 1982. A year later, Robert and Claudine Goldstein, officers of plaintiff, met in London with Ephraim Kogen, Hanes' sales agent, and Keith Alm, at that time President of Hanes, to discuss Hanes' European marketing strategy. Robert Goldstein recommended that Hanes market its product as outerwear and develop a sweatshirt and sweatpants program. In turn, Hanes implemented a European marketing program reflecting Goldstein's recommendations. The program contemplated using distributorships throughout Europe to market and resell the outerwear.

During 1983, Hanes expanded its European network of distributorships and, in November 1984, held its first distributors' meeting in Merelbeke-Belgian, the location of Hanes' foreign subsidiary, Hanes International. In a handbook provided at the meeting, Hanes described Hanes International as "our international distribution center," designed to receive Hanes outerwear from the United States and transport the outerwear to individual distributors throughout Europe. Jos Linkens, an officer of Hanes International, attended the meeting. Plaintiff, as a Hanes distributor for areas in France, also attended the meeting.

In April or May 1985, Hanes offered plaintiff an exclusive distribution right to Hanes products in a specified territory called L'Ile France. As a term of the exclusive distributorship, Hanes required plaintiff to cease the distribution of competing products and to refrain from initiating the distribution of competing products during the tenure of the exclusive distributorship. At the time the offer was made, plaintiff carried a complete line of American outerwear from approximately one dozen manufacturers. Following extensive negotiations between the parties, the bulk of which occurred in North Carolina, plaintiff accepted the exclusive distributorship and terminated its relationship with the other American manufacturers.

The parties created the exclusive distributorship contract through oral expressions, course of performance, course of dealing, course of trade and numerous writings, including correspondence and internal memos. The parties did not reduce the contract to a formal written document. The parties agreed the contract would last for a reasonable period, though not less than three years and with the original term renewable for three year periods. Hanes agreed to notify plaintiff in the event that plaintiff performed unsatisfactorily, thus giving plaintiff an opportunity to improve its performance and thereby avoid termination.

Plaintiff performed all of its obligations in accordance with the contract terms. Hanes never expressed dissatisfaction with plaintiff's performance and, on two occasions, Hanes awarded a plaque to plaintiff in recognition of plaintiff's exemplary performance.

During 1986, Hanes' Belgian distributor, an outfit called "Actionwear", whose principal shareholder is Etienne Vandermoortele, began invading plaintiff's territory with Hanes products and Italian products manufactured to the same specifications and design as Hanes products. Plaintiff states in its complaint that "Actionwear is and has been organized for the purpose of taking over the territory of distribution developed by plaintiff with the full knowledge, consent and cooperation of Jos Linkens, Keith Alm, and others unknown to plaintiff at this time." Plaintiff believes that Tri-Star Investments, a Dutch corporation whose investors include Vandermoortele, Linkens, and Alm, is also involved in the attempt to invade plaintiff's territory. In late May or early June of 1986, Defendant Hanes notified plaintiff that the exclusive distributorship would terminate on 30 June 1987.

Plaintiff filed this action on 12 December 1986 asserting four claims: (1) violations of the Sherman and Clayton Antitrust Acts in conspiring to restrict plaintiff's distribution territory, fixing the prices for which plaintiff could sell Hanes products, and tying the purchase of certain Hanes' products to the purchase of other Hanes products; (2) violation of North Carolina's unfair and deceptive trade statute based on the same facts that allegedly violate the federal antitrust laws; (3) breach of the exclusive distributorship contract; and (4) intentional interference with the distributorship contract by conspiring to undermine plaintiff's distributorship.

Defendants' filed this motion to dismiss on 2 February 1987 contending that the federal antitrust and state unfair trade claims fail to establish the requisite substantial effect on the commerce of either the United States or North Carolina. These claims, defendants argue, arise solely from alleged conduct and injuries occurring in France, thereby falling outside the limited extraterritorial reach of the federal antitrust and state unfair trade laws. As to the breach of contract claim, defendants maintain that they are not parties to the alleged contract. Defendants insist that the contract, if formed and binding in the first instance, is between plaintiff and Hanes International. Next, defendants assert that the interference with contract claim should be dismissed because, among other things, plaintiff did not allege facts that would satisfy the breach-of-contract element of such a claim. Finally, defendants contend that plaintiff's entire complaint should be dismissed based on the doctrine of forum non conveniens.

DISCUSSION

1) Subject Matter Jurisdiction: Extraterritorial Reach of the Sherman Act²

The Sherman Act by its terms applies to "every contract, combination ... or conspiracy," and every person who shall "monopolize, ... attempt to monopolize, or combine or conspire ... to monopolize" trade or commerce "among the several States, or with foreign nations." 15 U.S. C.A. § 1 (Supp.1987). The Supreme Court construed this language narrowly at first. In American Banana Co. v. United Fruit Co., Justice Holmes stated that the laws of the locality where the injury occurred dictate the rights of the parties:

the acts causing the damages were done, so far as appears, outside the jurisdiction of the United States.... It is surprising to hear it argued that they were governed by the act of Congress ... the general and almost universal rule is that the character of an act as lawful or unlawful must be determined wholly by the law of the country where the act is done.

213 U.S. 347, 355-56, 29 S.Ct. 511, 512, 53 L.Ed. 826 (1909). The Second Circuit, hearing a case on certification from the Supreme Court, largely rejected Holmes' "locality" test in United States v. Aluminum Co. of America (Alcoa), expanding the Sherman Act's extraterritorial reach to foreign conduct having a domestic effect. Judge Learned Hand wrote that "any state may impose liabilities, even upon persons not within its allegiance, for conduct outside its borders that has consequences within its borders which the state reprehends; and these liabilities other states will ordinarily recognize." 148 F.2d 416 (2d Cir.1945). The "effects" test announced in Alcoa has been widely followed by courts. ABA ANTITRUST SECTION, ANTITRUST LAW DEVELOPMENTS 529 (2d ed. 1984).

Since Aloca, courts have attempted to define the magnitude and type of domestic effects necessary to invoke jurisdiction under antitrust laws. Zenith Radio Corp. v. Matsushita Elec. Indus. Co., 494 F.Supp. 1161, 1187 (E.D.Penn.1980) (thorough discussion of the evolution of the law in this area). The Department of Justice stated that the Sherman Act applies to foreign transactions that have a "substantial and foreseeable effect on U.S. commerce." Antitrust Guide for International Operations 6-7 (Jan. 26, 1977); ABA ANTITRUST SECTION, ANTITRUST LAW DEVELOPMENTS 528-29. In contrast, one court held the effect need not be substantial and direct as long as it is not de minimus. Dominicus America Bohio v. Gulf & Western Industries, Inc., 473 F.Supp. 680, 687 (S.D.N.Y.1979). Other formulations of the "effects" test included:

`directly and materially affects foreign commerce'; `the combination affected the foreign commerce of this country'; `the conspiracy intended to affect imports and exports'; `though there is no showing as to the extent of commerce restrained it the contract deleteriously affected United States commerce'; `the conspiracy had the effect of suppressing imports into and exports from the United States'; ... `a direct and influencing effect on trade between the United States and foreign countries....'

Zenith, 494 F.Supp. at 1187.³

In 1982, Congress ended the...