Tri-R Systems, Ltd. v. Friedman & Son, Inc.

• Decision Date: 30 July 1981
• Docket Number: Civ. A. No. 79-K-1436.
• Citation: 518 F. Supp. 1271
• Parties: TRI-R SYSTEMS, LIMITED, a Colorado Limited Partnership, Plaintiff, v. FRIEDMAN & SON, INC., a Colorado Corporation; Packaging Corporation of America, Inc., a Delaware Corporation; Southwest Forest Industries, Inc., a Nevada Corporation; and Tamko Asphalt Products, Inc. of Kansas, a Kansas Corporation, d/b/a Royal Brand Roofing, Defendants.
• Court: U.S. District Court — District of Colorado

518 F. Supp. 1271

TRI-R SYSTEMS, LIMITED, a Colorado Limited Partnership, Plaintiff, v. FRIEDMAN & SON, INC., a Colorado Corporation; Packaging Corporation of America, Inc., a Delaware Corporation; Southwest Forest Industries, Inc., a Nevada Corporation; and Tamko Asphalt Products, Inc. of Kansas, a Kansas Corporation, d/b/a Royal Brand Roofing, Defendants.

Civ. A. No. 79-K-1436.

United States District Court, D. Colorado.

July 30, 1981.

John F. Head, Head, Moye, Carver & Ray, Denver, Colo., for Tri-R Systems.

L. Richard Freese, Jr., Davis, Graham & Stubbs, Denver, Colo., for Packaging Corp.

Robert J. Kapelke, Gorsuch, Kirgis, Campbell, Walker & Grover, Sheldon E. Friedman, Isaacson, Rosenbaum, Speigleman & Friedman, P. C., Denver, Colo., for Friedman.

Harry L. Hobson, Holland & Hart, Denver, Colo., for Southwest Forest.

James E. Hautzinger, Robert E. Youle, Sherman & Howard, Denver, Colo., for Tamko.

ORDER

KANE, District Judge.

This is an action for violation of sections one and two of the Sherman Act and section three of the Clayton Act. It is before me on motions for summary judgment by defendant Tamko Asphalt Products, Inc., of Kansas (Tamko) and defendant Packaging Corporation of America (PCA). Having reviewed the pleadings, briefs, affidavits and depositions submitted in support of these motions and mindful of the rarity of summary judgment in anti-trust cases I have concluded that there are genuine issues of fact in dispute and summary judgment would be inappropriate at this time.

Summary judgment should be entered only when the pleadings, depositions, affidavits and admissions filed show there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Poller v. Columbia Broadcasting System, 368 U.S. 464, 468, 82 S.Ct. 486, 488, 7 L.Ed.2d 458 (1962). It is a drastic relief which must be applied with caution and the pleadings of the party opposing the motion are to be liberally construed, Redhouse v. Quality Ford Sales, Inc., 511 F.2d 230 (10th Cir. 1975).

Summary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles, the proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot. It is only when the witnesses are present and subject to cross-examination that their credibility and the weight to be given their testimony can be appraised. Trial by affidavit is no substitute for trial by jury. Poller v. Columbia Broadcasting Co., 368 U.S. at 473, 82 S.Ct. at 491. See also, Norfolk Monument Co. v. Woodlawn Memorial Gardens, 394 U.S. 700, 704, 89 S.Ct. 1391, 1393, 22 L.Ed.2d 658 (1969); Aviation Specialties, Inc. v. United Technologies Corp., 568 F.2d 1186, 1193 (5th Cir. 1978).

Summary judgment is appropriate, however, when it is plain that the allegedly unlawful practice does not exist and plaintiff's claim is without merit. The mere allegation of a Sherman Act claim is not sufficient to withstand a motion for summary judgment once it has been rebutted, Solomon v. Houston Corrugated Box Co., 526 F.2d 389 (5th Cir. 1976), and the facts are developed and legal issues clearly presented. Nationwide Auto Appraiser Serv. Inc., v. Association of C&S Co., 382 F.2d 925, 929 (10th Cir. 1967). To survive a motion for summary judgment, however, the evidence must suggest reasonable inferences of conspiracy. General Chemicals, Inc. v. Exxon Chemical Co. USA, 625 F.2d 1231, 1233 (5th Cir. 1980). Here such an inference exists making summary judgment inappropriate.

Plaintiff alleges violations of §§ 1 and 2 of the Sherman Act and § 3 of the Clayton Act. To establish a violation of § 1¹ of the Sherman Act, plaintiff must show an unlawful restraint of trade in interstate commerce; a contract, combination, or conspiracy to attain it and damages therefrom. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977); Radiant Burners, Inc. v. Peoples Gas Light & Coke Co., 364 U.S. 656, 660, 81 S.Ct. 365, 367 (1961); Randy's Studebaker Sales, Inc. v. Nissan Motor Corp., 533 F.2d 510, 516 (10th Cir. 1976). Section 2² of the Sherman Act prohibits monopoly or an attempt to monopolize any part of interstate or foreign trade or commerce. This section is aimed inter alia at the acquisition or retention of effective market control. United States v. Griffith, 334 U.S. 100, 106-107, 68 S.Ct. 941, 945-946, 92 L.Ed. 1236 (1948).

Section 3³ of the Clayton Act requires a showing that there was an agreement or understanding between defendants that PCA and Tamko would only buy from Friedman and the effect of that agreement or understanding may be to lessen substantially competition or create a monopoly in a substantial share of the line of interstate commerce affected. Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961); Dillon Materials Handling Inc. v. Albion Industries, 567 F.2d 1299, 1302 (5th Cir.), cert. denied, 439 U.S. 832, 99 S.Ct. 111, 58 L.Ed.2d 127 (1978).

Common to all of these claims is the element of a contract, combination, or conspiracy which restrains trade, forecloses competition or monopolizes a part of interstate commerce. PCA and Tamko base their motions for summary judgment on the lack of such a contract, combination or conspiracy. Thus the dispositive inquiry is whether there is a genuine issue as to the existence of a combination, contract or conspiracy between Friedman and Tamko or PCA.

The facts are long and convoluted, but a review of them is necessary in determining whether there has been a violation of the acts. All of the parties in this case are involved in one way or another in the business of recycling waste paper. Plaintiff, Tri-R Systems, Limited (Tri-R) and defendant Friedman & Son, Inc., (Friedman) are in the business of buying four grades⁴ of waste paper for recycling in the Denver metropolitan area and reselling it to mills in the western United States, and, in the case of Tri-R to Mexico. Tri-R alleges that Friedman enjoys a monopoly in the Denver area in all four grades.

The claim against PCA involves two grades of paper: mixed and corrugated. Tri-R's first claim for relief alleges conspiracy in violation of § 1 of the Sherman Act between Friedman and PCA whereby they agreed that PCA buy the above grades of paper in Denver exclusively from Friedman and not Friedman's competitor Tri-R. The second claim for relief alleges that Friedman has used its monopoly position in the Denver buying market to obtain PCA's agreement to refuse to buy corrugated and mixed paper from Tri-R and PCA acquiesced in this agreement, violating § 2 of the Sherman Act. Finally, the third claim for relief alleges a conspiracy between Friedman and PCA to create or maintain Friedman's monopoly in the Denver buying market, in violation of § 3 of the Clayton Act.

Tri-R was formed in 1977 by David Powelson, a discharged Friedman employee, for entry into the high grade and newspaper recycling business. Tri-R buys and sells waste paper in four grades from a number of sources, collects it at its plant and segregates it into various grades. It is then processed into bales and shipped to the purchaser.

Friedman is in the same business as Tri-R and has been in the business for many years. It has plants in Denver and Colorado Springs, Colorado; Tulsa and Oklahoma City, Oklahoma; Albuquerque, New Mexico, Wichita and Hutchinson, Kansas; and Salt Lake City, Utah. It is a closely held corporation under the direction of Marshall Friedman and Joe Goodman. In the Denver metropolitan area, Friedman enjoys a monopoly in the waste paper recycling business. At the time Tri-R began operation, Friedman allegedly had 90% of the newspaper tonnage, 80% of the high grade tonnage and 98% of the mixed and corrugated tonnage.

Plaintiff alleges that after Tri-R began operations, Friedman initiated practices to put it out of business. These practices included hiring a private detective to observe Tri-R's business and its customers, obtaining information from railroad employees concerning the destination of Tri-R's rail cars, ordering its purchasing personnel to obtain and maintain customers whatever the price, and formulating a break-even analysis of Tri-R.

PCA is a user of mixed and corrugated paper which buys heavily out of the Denver market for its plant located in Denver. From mid-1977 to the commencement of this suit, virtually all of the paper purchased by PCA for its Denver plant came from Friedman.

The first contact between Tri-R and PCA occurred in late February 1978. Who initiated the initial contact is in dispute, but in any case Dick Cowan, PCA's purchasing agent visited Tri-R's plant. PCA was interested in buying high grade paper for its Hutchinson, Kansas mill. Powelson communicated Tri-R's need for a low grade market. Cowan replied that its Denver mill's supply for these grades was currently being filled by Friedman. PCA also maintains that at the time plaintiff had no low grades to sell.

The next attempt to sell mixed and corrugated to PCA occurred in the summer of 1978 when Powelson met John Pape, PCA's chief purchasing officer in Evanston, Illinois. Here there is conflicting testimony. PCA maintains that Pape told Powelson and Frost, a broker for Tri-R, that when the need for waste paper arose, including corrugated and mixed, PCA would consider Tri-R as an additional source. Tri-R maintains that when Powelson told Pape it needed an outlet for its mixed and corrugated paper in Denver, Pape responded that PCA had an excellent relationship with Friedman, that if PCA bought from Tri-R it would only invite supply problems from Friedman, that PCA would not buy from Tri-R and Powelson should be patient until Joe Goodman was out of the picture.

The next contact between the two companies occurred in September of 1978 when Tri-R was awarded a one year contract for waste paper disposal from the federal center in...