Uniroyal, Inc. v. Hoff and Thames, Inc., Civ. A. No. J77-0314(N).

• Decision Date: 02 March 1981
• Docket Number: Civ. A. No. J77-0314(N).
• Citation: 511 F. Supp. 1060
• Parties: UNIROYAL, INC., Plaintiff v. HOFF AND THAMES, INC., d/b/a Case Tire and Supply Company, Robert E. Thames, and A. L. Hoff, Defendants.
• Court: U.S. District Court — Southern District of Mississippi

511 F. Supp. 1060

UNIROYAL, INC., Plaintiff v. HOFF AND THAMES, INC., d/b/a Case Tire and Supply Company, Robert E. Thames, and A. L. Hoff, Defendants.

Civ. A. No. J77-0314(N).

United States District Court, S. D. Mississippi, Jackson Division.

March 2, 1981.

COPYRIGHT MATERIAL OMITTED

Lawrence J. Franck, Richard L. Forman and Alan W. Perry, Butler, Snow, O'Mara, Stevens & Cannada, Jackson, Miss., for plaintiff.

Pat H. Scanlon, E. Stephen Williams, Young, Scanlon & Sessums, Jackson, Miss., for defendants.

MEMORANDUM OPINION

NIXON, District Judge.

This action was filed by Uniroyal, Inc. ("Uniroyal") against the defendant Hoff and Thames, Inc., d/b/a Case Tire and Supply Company ("Case"), Robert E. Thames ("Thames") and A.L. Hoff ("Hoff"). Uniroyal's Complaint, founded on diversity jurisdiction, alleges that Case is indebted to Uniroyal as the result of credit extended by Uniroyal to Case in connection with Case's purchase of tires from Uniroyal. The Complaint further alleges that Thames and Hoff are individually liable for the indebtedness of Case, as the result of individual guarantees executed by them.

Case answered the Uniroyal Complaint, and filed a counterclaim against Uniroyal and Otasco, Inc. ("Otasco"), alleging that Uniroyal had granted Otasco favorable prices which discriminated against Case, in violation of the Robinson-Patman Act, 15 U.S.C. § 13 et seq.

Case subsequently dismissed its claim against Otasco without prejudice and amended its counterclaim against Uniroyal, Inc. The Amended Counterclaim asserted by Case states the following:

1. That Uniroyal violated the Robinson-Patman Act

(a) by transferring tires to its company-owned stores at a price less than the price at which Case purchased;

(b) by selling tires to other dealers in Mississippi at a lower price than the price at which Case purchased; and

(c) by selling tires to Otasco at a lower price than the price at which Case purchased.

2. That Uniroyal entered into a contract agreement or a combination with Otasco in restraint of trade or commerce, in violation of the Sherman Act (15 U.S.C. §§ 1-7).

3. That Uniroyal's selling arrangement with Otasco violated Mississippi Code of 1972, Section 75-21-1 et seq..

4. That Uniroyal breached a contract with Case granting Case an exclusive sales territory by allowing Otasco to purchase tires from Uniroyal and resale them at Otasco's Brookhaven store.

This case is now before the Court on a Motion for Summary Judgment filed by Uniroyal as to the counterclaims asserted by Case and on Motion for Summary Judgment filed by Case with respect to cost justification studies prepared by Uniroyal in support of the functional discount granted by Uniroyal to Otasco. Extensive discovery has been undertaken which includes numerous depositions, extensive interrogatories, and the production of voluminous documents and the Court now finds this matter ripe for decision.

Uniroyal is a corporation organized and existing under the laws of the State of New Jersey and is engaged in numerous business activities, including that involved in this litigation, the manufacture and sale of tires. Uniroyal sells its tires to various outlets, including its company-owned stores and independent dealers.

The defendant Hoff & Thames, Inc. ("Case") is a corporation organized and existing under the laws of the State of Mississippi. It was organized for the purpose of acquiring an existing retail tire business known as Case Tire & Supply, and has continued to do business in Brookhaven using that trade name.

The defendants, Robert E. Thames ("Thames") and A.L. Hoff ("Hoff"), adult resident citizens of Mississippi, are the owners of all the outstanding capital stock of Case. Furthermore, they are its corporate officers in addition to being directly involved in the conduct of its business. Hoff and Thames each executed a written guarantee with respect to Case's indebtedness to Uniroyal.

FINDINGS OF FACT

a. Uniroyal's Dealings with Case

For several years prior to 1973, Case was engaged in the business of retail tire sales as a tire dealer in Brookhaven, Mississippi, handling various brands of tires. Prior to 1973, Case occasionally purchased Uniroyal tires from Uniroyal but had no dealership arrangement with Uniroyal.

In 1973, Case and Uniroyal entered into a Zeta Charter Agreement (Exhibit "I", Thames Dep.), under the provisions of which Uniroyal agreed that it would not deliver Zeta tires to any other retail or wholesale establishment in the charter area, Lincoln County, Mississippi. The charter area was designated as Case's area of primary responsibility, and Case agreed to use its best efforts to distribute Zeta tires within that area. The agreement further provided that Uniroyal would from time to time sell Zeta tires to Case, and that Case would purchase Zeta tires from Uniroyal for sale and distribution in accordance with the terms of the Zeta Charter. The agreement provided that it would commence as of March 20, 1973 and continue in force until December 31, 1974, unless sooner terminated. The agreement further provided that it might be terminated by either party at any time upon thirty (30) days notice, during which period Uniroyal would be required to deliver to Case only such Zeta tires as had already been ordered from Case by his customers, not in excess of Case's average purchases for any thirty (30) consecutive days during the intercedent operation of the agreement.

There is no evidence that the Zeta Charter was ever formally renewed or extended beyond December 31, 1974, although both parties continued their business dealings after that date and until sometime in early 1977, just as if it remained in effect.

At the outset, Uniroyal supplied tires to Case directly from the Uniroyal factory, but in late 1974, Uniroyal placed into effect the so-called "Mississippi Plan", whereby Case and all other dealers in Mississippi were supplied their tires directly from the Uniroyal company-owned stores, primarily one located in Jackson, Mississippi.

Case was not satisfied with the arrangement pursuant to which it was supplied its tires from the company-owned store, because it believed that the purchase price from the store was higher than the price at which Case had previously purchased tires directly from the factory (Thames Dep., at 164-65). As a result, Case reduced the volume of its purchases from Uniroyal during 1975 and 1976 and increased its purchases of other brands of tires during that period (Thames Dep., at 203).

In late 1976, Uniroyal embarked on a plan of replacing all the Zeta Charter Agreements with an agreement entitled the "Uniroyal Dealer Agreement." (Burgess Dep., at 45; Roveto Dep., at 64.) Insofar as the controversy between these parties is involved, the only significant difference between the Zeta Charter Agreement and the Uniroyal Dealer Agreement is that the Uniroyal Dealer Agreement did not contain the exclusive territorial provision of the Zeta Charter Agreement.

Although the parties are in disagreement concerning the exact dates, it is agreed that sometime in late 1976 or early 1977 Case was contacted by a representative of Uniroyal who advised them that Uniroyal was replacing all Zeta Charter Agreements with Uniroyal Dealer Agreements, and requested them to sign the new Dealer Agreement. (Thames Dep., at 270; Finch Dep., at 22-23.) Case, however, refused. At some time thereafter, Case was either delivered or mailed a letter signed by Ralph Morelli, the Uniroyal District Manager (Exhibit "I", Morelli Dep.; Thames Dep., at 179; Morelli Dep., at 39-40.), which followed a form supplied to Morelli by Uniroyal management for use when a dealer refused to sign the new agreement (Morelli Dep., at 66.) This letter informed Case that its Zeta Charter Agreement had been terminated. The letter enclosed copies of the Uniroyal Dealer Agreement which Case was requested to sign. The letter further provided that if Case continued to refuse to sign the Dealer Agreement, Uniroyal would nevertheless continue to sell tires to Case.

Uniroyal personnel testified through deposition that the reason for elimination of the Zeta Charter Agreement was that it applied only to Zeta tires, a particular type of guaranteed mileage tire manufactured by Uniroyal. (Burgess Dep., at 27-28; Roveto Dep., at 24-25.) The guarantees applicable to those tires have been withdrawn, the product line for the tire was diminishing, and there was a great possibility that the Zeta tire would be phased out. Zeta tires would continue to be offered, but only as part of the regular Uniroyal brand and covered by a new Uniroyal Dealer Agreement, which would be the only dealer agreement offered by Uniroyal. Prior to the implementation of the plan to replace the Zeta Charter Agreement with the Uniroyal Dealer Agreement, both forms of dealer agreements had been in effect with various dealers throughout the United States. (Roveto Dep., at 56-58.)

Case refused to sign the new Dealer Agreement (Thames Dep. at 270), and beginning in February, 1977, Case refused to make any further payments on the accounts owed to Uniroyal. The accounts included amounts owed for merchandise recently ordered, together with the balance outstanding on funds advanced by Uniroyal in 1973 as a credit against merchandise ordered by Case at that time. (Thames Dep., at 478.)

Subsequently, Uniroyal placed this claim in the hands of its attorneys for collection of some $30,000.00 which it alleged was owed by Case, Thames, and Hoff. This suit was filed and Case responded with the counterclaim in question.

b. Uniroyal's Dealings With Otasco

Otasco is a corporation organized under the laws of the State of Nevada with its principal place of business in Oklahoma. It owns several hundred stores located generally in the southern part of the United States, and also supplies several hundred dealer-owned stores located in the same general area. The Otasco stores and dealers sell a...