US Anchor Mfg., Inc. v. Rule Industries, Inc.

• Decision Date: 27 June 1989
• Docket Number: Civ. A. No. 86-CV-2447-JTC.
• Parties: U.S. ANCHOR MANUFACTURING, INC., Plaintiff, v. RULE INDUSTRIES, INC. and Tie Down, Inc., a/k/a Tie Down Engineering, Inc., Defendants, v. William CHAPMAN and U.S. Anchor Manufacturing, Inc., Defendants in Counterclaim.
• Court: U.S. District Court — Northern District of Georgia

717 F. Supp. 1565

U.S. ANCHOR MANUFACTURING, INC., Plaintiff, v. RULE INDUSTRIES, INC. and Tie Down, Inc., a/k/a Tie Down Engineering, Inc., Defendants, v. William CHAPMAN and U.S. Anchor Manufacturing, Inc., Defendants in Counterclaim.

Civ. A. No. 86-CV-2447-JTC.

United States District Court, N.D. Georgia, Atlanta Division.

June 27, 1989.

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James Alexander Porter, Porter & Doster, Atlanta, Ga., for plaintiff.

John A. Chandler, Kimberly Logue Woodland, Sutherland Asbill & Brennan, Atlanta, Ga., for defendant Rule Industries, Inc.

Harold Turner Daniel, Jr., Laurie Webb Daniel, Webb & Daniel, Atlanta, Ga., for Tie Down, Inc.

ORDER OF COURT

CAMP, District Judge.

This matter is before the Court on defendant Tie Down, Inc.'s Motion for Summary Judgment; defendant Rule Industries, Inc.'s Motion for Summary Judgment and the motion of William Chapman and U.S. Anchor for Summary Judgment. For the following reasons, the above motions for summary judgment are DENIED. Defendant Tie Down's motion to file a supplemental brief and an amendment to this motion is GRANTED.

This is an action for treble damages and injunctive relief for alleged antitrust violations under Sections 1 and 2 of the Sherman Act, and Section 3 of the Clayton Act. Plaintiff also alleges that defendants' actions constitute an unfair restraint of trade in violation of Article 3, Section VI, Paragraph V of the Georgia Constitution and O.C.G.A. § 13-8-2. Defendants seek summary judgment on all of plaintiff's theories for relief. Defendant Tie Down, Inc., a/k/a Tie Down Engineering, Inc. ("Tie Down") brings a counterclaim against plaintiff U.S. Anchor Manufacturing, Inc. ("U.S. Anchor") and William Chapman. This counterclaim alleges a breach of fiduciary duty; misappropriation of confidential business information; tortious interference with business relations; and common law fraud and deceit. U.S. Anchor and William Chapman seek summary judgment on Tie Down's theories for relief in its counterclaim.

I. FACTS

The present action involves several manufacturers and suppliers of fluke anchors. Anchors and other marine industry products are generally sold by suppliers to wholesale distributors, who in turn sell the anchors to boat dealers, marinas, and other retailers for ultimate resale to the consumer, the boat owner. The supplier may either manufacture its own anchors, as does U.S. Anchor, or purchase them from another domestic manufacturer, as Rule Industries, Inc. ("Rule") does from Tie Down, or import them from abroad.

In 1974, defendant Tie Down decided to expand its business of manufacturing anchoring mechanisms for mobile homes into the marine anchor business. Tie Down thus began manufacturing and selling inexpensive "generic" anchors under the "Hooker" tradename. These anchors were among the earliest generic fluke style anchors. In 1974, Tie Down expanded its Hooker line of anchors to include a fluke style anchor called the Danforth. Tie Down inexpensively duplicated the Danforth anchor, whose patent had expired, and sold it cheaply under the Super Hooker tradename.

Defendant Rule entered the recreational marine anchor business in 1983 when it acquired the Danforth line of anchors from the Eastern Company. In May 1985, Rule agreed to acquire Tie Down's marine anchor division, including its anchor inventory, certain machinery and equipment used in the manufacture of marine anchors, and a license to exclusive use of Tie Down's marine anchor trade names ("Hooker", "Super Hooker", and "Hugger") for seven years. In addition, Tie Down agreed not to sell anchors in competition with Rule for at least five years. Tie Down maintains that it negotiated this manufacturing agreement to recoup losses it suffered at this time.

Plaintiff U.S. Anchor was organized by William Chapman, Tie Down's former President, in the Spring of 1985 to compete with Rule and Tie Down in the sale of inexpensive generic anchors. William Chapman was employed by Tie Down in January, 1979, and appointed President in July, 1984. Chapman maintains that he resigned in January, 1985, as President of Tie Down because of disagreements with Tie Down's owner, Chuck MacKarvich, over the proper methods of running the company and Chapman's lack of managerial authority. Chapman maintains that he did not contemplate starting a marine anchor company until after his January resignation, at which time, he generally advised MacKarvich that he might end up in some form of competition with Tie Down. Chapman maintains that it was not until April, 1985, when Tie Down entered into an agreement to sell its marine anchor division to Rule Industries, that he saw an opportunity to start a marine anchor company.

Defendant Tie Down, however, contends that Chapman actively prepared to go into business in competition with Tie Down while still serving as President of Tie Down. Tie Down alleges that in early 1985, while still employed by Tie Down, Chapman used Tie Down's resources, personnel and confidential business information to set up his competing business, U.S. Anchor. These allegations form the basis of Tie Down's counterclaim. MacKarvich testified that when he fired Chapman in late April, 1985, for making disparaging remarks about Tie Down, he did not know of Chapman's plans to compete in the marine anchor business.

Plaintiff now alleges that defendants have conspired to engage in, and have engaged in, predatory pricing and unlawful tying arrangements to eliminate plaintiff as a competitor and to achieve a monopoly in the relevant product market. Plaintiff maintains that it originally intended to set its prices at 10-12% below that of the previous season's prices; however, these prices never went into effect because Rule immediately reduced its prices by 15% to undercut plaintiff's pricing. Plaintiff then maintains that it cut its prices and, in response, Rule lowered its prices by an additional 20%. Rule, however, argues that its price reductions were in response to the influx of cheaper anchors by foreign competitors.

II. SUMMARY JUDGMENT STANDARD

Rule 56(c), Fed.R.Civ.P., defines the standard for summary judgment: Courts should grant summary judgment when "there is no genuine issue as to any material fact ... and the moving party is entitled to judgment as a matter of law." In Celotex Corp v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986), the Supreme Court interpreted Rule 56(c) to require the moving party to demonstrate that the nonmoving party lacks evidence to support an essential element of his claim. Thus, the movant's burden is easily "discharged by showing—that is, pointing out to the district court—that there is an absence of evidence to support the nonmoving party's case." Once the movant has met this burden, the opposing party must then present evidence establishing a material issue of fact. Id. The nonmoving party must go beyond the pleadings and submit evidence in the form of affidavits, depositions, admissions and the like, to demonstrate that a genuine issue of material fact does exist. Id. The Supreme Court stated in Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 2514, 91 L.Ed.2d 202 (1986), "that the plaintiff, to survive the defendant's motion, need only present evidence from which a jury might return a verdict in his favor. If he does so, there is a genuine issue of fact that requires a trial."

"Summary judgment may be especially appropriate in an antitrust case because of the chill antitrust litigation can have on legitimate price competition." McGahee v. Northern Propane Gas Co., 858 F.2d 1487, 1493 (11th Cir.1988), cert. denied, ___ U.S. ___, 109 S.Ct. 2110, 104 L.Ed.2d 670 (1989), citing, Matsushita Electric Industrial Co. v. Zenith Radio Corporation, 475 U.S. 574, 595, 106 S.Ct. 1348, 1360, 89 L.Ed.2d 538 (1986). Thus, an antitrust plaintiff must present evidence that tends, when interpreted in a light most favorable to plaintiff, to exclude the possibility that defendant's conduct was consistent with permissible competition as with illegal conduct. Id.

III. SHERMAN ACT CLAIMS

Plaintiff alleges a claim for attempted monopolization pursuant to § 2 of the Sherman Act; conspiracy and combination to monopolize pursuant to § 2 of the Sherman Act; and conspiracy to eliminate competitors in violation of § 1 of the Sherman Act. See 15 U.S.C. §§ 1, 2.

A § 1 Sherman Act claim for conspiracy to eliminate a competitor requires (1) an agreement to engage in anticompetitive conduct and (2) an adverse impact on the relevant market as an "unreasonable restraint of trade". Hill Aircraft & Leasing Corporation v. Fulton County, 561 F.Supp. 667, 676 (N.D.Ga.1982), aff'd, 729 F.2d 1467 (11th Cir.1984).

To sustain a § 2 Sherman Act claim of attempted monopoly, a plaintiff must show: (1) the relevant product and geographic markets; (2) that the defendant had the specific intent to gain a monopoly position in the market; and (3) that there was a dangerous probability of de facto monopolization. See American Tobacco Co. v. United States, 328 U.S. 781, 66 S.Ct. 1125, 90 L.Ed. 1575 (1946); Bill Beasely Farms, Inc. v. Hubbard Farms, 695 F.2d 1341, 1342 (11th Cir.1983); Photovest Corporation v. Fotomat Corporation, 606 F.2d 704, 711-21 (7th Cir.1979), cert. denied, 445 U.S. 917, 100 S.Ct. 1278, 63 L.Ed.2d 601 (1980). A § 2 claim for combination or conspiracy to monopolize requires proof of the same elements involved in an attempt claim with the exception that it is not necessary to show that the scheme to monopolize was ever "attempted to any harmful extent." American Tobacco Co., 328 U.S. at 811, 66 S.Ct. at 1139.

All of plaintiff's Sherman Act claims require defendant's intent to engage in anticompetitive conduct. Proof of predatory pricing can satisfy this element of intent for all three of plaintiff's Sherman Act claims. Cargill v. Monfort of Colorado, Inc., 479 U.S. 104, 107 S.Ct. 484, 493, 93...