White Consol. Industries, Inc. v. Whirlpool Corp., C85-472

• Decision Date: 03 July 1985
• Docket Number: No. C85-472,C85-667.,C85-472
• Citation: 612 F. Supp. 1009
• Parties: WHITE CONSOLIDATED INDUSTRIES, INC., Plaintiff, v. WHIRLPOOL CORP., Dart & Kraft, Inc., Hobart Corp., Emerson Electric Co., Defendants. MAGIC CHEF, INC., Plaintiff, v. WHIRLPOOL CORP., Dart & Kraft, Inc., Hobart Corp., Emerson Electric Co., Defendants.
• Court: U.S. District Court — Northern District of Ohio

612 F. Supp. 1009

WHITE CONSOLIDATED INDUSTRIES, INC., Plaintiff, v. WHIRLPOOL CORP., Dart & Kraft, Inc., Hobart Corp., Emerson Electric Co., Defendants.

MAGIC CHEF, INC., Plaintiff, v. WHIRLPOOL CORP., Dart & Kraft, Inc., Hobart Corp., Emerson Electric Co., Defendants.

Nos. C85-472, C85-667.

United States District Court, N.D. Ohio, E.D.

July 3, 1985.

COPYRIGHT MATERIAL OMITTED

James M. Porter, Thomas S. Kilbane, James P. Murphy, Walter J. Rekstis, III, John R. Gall, John E. Lynch, Jr., Stacey D. Ballin, Squire, Sanders & Dempsey, Daniel R. Elliott, Jr., Cleveland, Ohio, for White Consol.

John K. Train, III, Martin J. Elgison, H. Stephen Harris, Jr., Alston & Bird, Atlanta, Ga., Jason C. Blackford, Mark O'Neill, Weston, Hurd, Fallon, Paisley & Howley, Cleveland, Ohio, for Magic Chef, Inc.

M. Neal Rains, Eric H. Zagrans, Stephen R. Twiss, Arter & Hadden, Cleveland, Ohio, Jerome A. Hochberg, Ann K. Sullivan, Paul H. Friedman, Arter & Hadden, Washington, D.C., William K. Holmes, Joseph A. Scoville, Tracey T. Larsen, Philip S. VanDerWeele, Warner, Norcross & Judd, Grand Rapids, Mich., Charles Putnam, Robert I. Frey, Benton Harbor, Mich., for Whirlpool Corp.

Donald G. Kempf, Jr., Tefft W. Smith, Thomas D. Yannucci, John T. Whatley, Randall A. Hack, Kirkland & Ellis, Chicago, Ill., George F. Karch, Jr., Thompson, Hine & Flory, Cleveland, Ohio, for Dart & Kraft, Inc.

Arthur F. Golden, Paul W. Bartel, Daniel L. Brackett, Davis, Polk & Wardwell, New York City, H. Stephen Madsen, Jonathan E. Thackeray, Baker & Hostetler, Cleveland, Ohio, for Emerson Elec.

KRENZLER, District Judge.

INTRODUCTION

Plaintiff White Consolidated Industries, Inc. (hereinafter "White") filed case No. 85-472 against defendants, Whirlpool Corporation (hereinafter "Whirlpool"), Dart & Kraft, Inc. (hereinafter "D & K"), Hobart Corporation (hereinafter "Hobart"), and Emerson Electric Co. (hereinafter "Emerson"), for alleged violations of the antitrust laws of the United States. This complaint was filed in two counts. Count I alleges violations of §§ 7 and 16 of the Clayton Act (15 U.S.C. §§ 18 and 26) and Count II alleges violations of §§ 1 and 2 of the Sherman Act (15 U.S.C. §§ 1 and 2 and 15 U.S.C. § 26).

Magic Chef, Inc. (hereinafter "Magic Chef") filed a complaint similar to White's, against the same four defendants, in the United States District Court for the Eastern District of Tennessee, Southern Division. That case was transferred to this Court and assigned case No. C85-667 and consolidated with C85-472.

The complaints seek a permanent injunction prohibiting the sale of KitchenAid to Whirlpool and Emerson. Pending before the Court are the plaintiffs' motions for a preliminary injunction.

The Court finds, given the current state of the defendants' attempted "curative divestiture," that an injunction is in order. As is discussed fully below, the curative divestiture, at this point in the proceedings, does not appear to adequately remedy the anti-competitive effects of the sale of KitchenAid to Whirlpool. The defects the Court cites in the curative divestiture are sufficiently inhibitive of Emerson's independence in the market to require an injunction at this time. Were these features absent, the Court would not have enjoined the transaction, but these limitations on Emerson's ability to freely compete mandate the issuance of a preliminary injunction.

THE HEARING

It should be noted at the outset that the hearing on the motions for a preliminary injunction was somewhat extraordinary. Prior to the hearing, all of the parties participated in the Hart-Scott-Rodino proceedings at the Federal Trade Commission pursuant to 15 U.S.C. § 18a.¹ Thus, well before the injunction hearing had started, the parties had already done substantial preparatory work and had made complete, formal presentations of their respective positions in another forum. In addition, though time was short, prior to the start of the hearing the parties engaged in substantial discovery under the supervision of this Court.

The hearing began on April 29, 1985, and lasted approximately five weeks. There were 10 live witnesses that testified for the plaintiffs and five live witnesses for the defendants. The hearing transcript is approximately 3,500 pages long. Over 20 depositions were submitted to the Court as substantive evidence in addition to the hearing testimony. The parties introduced 587 exhibits in evidence.

The plaintiffs' three expert witnesses were Professor Joseph Bower of Harvard, Professor Werner Sichel, a visiting scholar at the Hoover Institute at Stanford, and Professor Oliver Williamson of Yale. The defendants' expert witness was Professor Benjamin Klein of the University of California at Los Angeles.

Lay witnesses testifying for White were Ward Smith, Chief Executive Officer and President of White; and Harold D. Schafer, Caroll B. Wood, and John Gehling, all officers of White or one of its subsidiaries. Testifying for Magic Chef were Bradford Rymer, Jr., Chairman of Magic Chef; and John M. McDavitt and John Green, both officers of Magic Chef. Testifying for the defendants were Warren Batts, President of Dart and Kraft; David Whitwam, Vice-President of Whirlpool; Dwanton Laverne Seals, President of In-Sink-Erator; and J.J. Adorjan, Executive Vice-President of Emerson. The deposition testimony considered by the Court included that of Jack Sparks, Chairman of Whirlpool; Charles F. Knight, Chairman of Emerson; and Glenn Olinger, President of KitchenAid.

This lengthy hearing, with such distinguished witnesses and such extensive preparation, was tantamount to a hearing on the merits. Indeed, in a rare show of unity, counsel for all parties agreed that the hearing was "the whole ball game." The plaintiffs insisted that if an injunction were denied, divestiture later would be impossible. The defendants argued that if an injunction were granted, the deal was likely to fall apart long before a hearing on the merits could take place.

While the Court will not and can not foreclose a trial on the merits, only genuinely new or changed evidence is likely to produce a different result at trial. Still, the attorneys in this case could not have known the nature of the injunction which would be handed down when they declared the proceedings on the injunction would be "the whole ball game." The Court considers it the province of the parties, the business people, to determine how to proceed with their business transaction and this lawsuit from here.

THIS ORDER

The Court notes that this order is not organized with a rigid differentiation between findings of fact and conclusions of law. Throughout the findings of fact section of the opinion, the Court has periodically made conclusions of law. This somewhat unorthodox procedure has been employed because of the need to make conclusions of law at various points in the Court's factual analysis. Conclusions of law made at various stages of the Court's opinion form the basis for the next stage of factfinding.

In an effort to comply with Fed.R.Civ.P. 52, the Court has included a separate conclusions of law section at the end of this opinion. That section is composed of a reiteration of the legal conclusions, with supportive citations, drawn throughout the findings of fact section.

FINDINGS OF FACT

I. THE PARTIES

A. Plaintiff White

Plaintiff White is a publicly held Delaware corporation with its principal offices in Lakewood, Ohio. It is licensed as a foreign corporation to do business in the State of Ohio.

White manufactures, and distributes nationally, a full line of major household appliances including refrigerators, gas and electric ranges, built-in ovens, freezers, laundry equipment and dishwashers, under various private-brand names including "Frigidaire," "White-Westinghouse," "Kelvinator," and "Gibson." In addition, White purchases garbage disposers from Emerson and distributes them under its brand names, "Frigidaire" and "White-Westinghouse." White also buys trash compactors from Whirlpool and markets them under its private name, "Frigidaire." In 1984, White's net sales were $2.1 billion.

B. Plaintiff Magic Chef

Plaintiff Magic Chef is a corporation organized for profit under the laws of the State of Delaware. Its principal place of business and its office are in Cleveland, Tennessee.

Magic Chef manufactures, and distributes nationally, electric and gas ranges, refrigerators, microwave ovens, freezers, and laundry equipment under various brand names including "Magic Chef" and "Admiral." Magic Chef also distributes nationally other household appliances including dishwashers, kitchen garbage disposers, and kitchen trash compactors, which it purchases from other manufacturers. Magic Chef markets these products nationwide under its private brand name, "Magic Chef," and other brand names. In 1984, Magic Chef's net sales were $1 billion.

C. Defendant Whirlpool

Defendant Whirlpool is a publicly held Delaware corporation with its principal offices in Benton Harbor, Michigan. Whirlpool is licensed as a foreign corporation to do business in the State of Ohio and transacts business in the Northern District of Ohio.

Whirlpool manufactures, and distributes nationally, a full line of major household appliances including refrigerators, electric and gas ranges, built-in ovens, freezers, laundry equipment, dishwashers, and trash compactors under its "Whirlpool" brand name. Whirlpool sells approximately one-half of the appliances it manufactures to Sears, Roebuck and Co. (hereinafter "Sears") and markets the remainder under the Whirlpool name. Whirlpool is a middle-level marketer with reported sales in excess of $3 billion in 1984.

D. Defendant D & K

D & K is a publicly held Delaware corporation with its principal offices in Northbrook, Illinois. It is a diversified food and consumer products company which transacts business in the Northern District of Ohio through its agent and wholly-owned subsidiary, Hobart, which...