Zenith Vinyl Fabrics Corp. v. Ford Motor Company

• Decision Date: 11 April 1973
• Docket Number: Civ. A. No. 28333.
• Citation: 357 F. Supp. 133
• Parties: ZENITH VINYL FABRICS CORP., a New Jersey corporation, Plaintiff, v. FORD MOTOR COMPANY and Eltra Corp., successor to Electric Autolite Company, Defendants.
• Court: U.S. District Court — Western District of Michigan

357 F. Supp. 133

ZENITH VINYL FABRICS CORP., a New Jersey corporation, Plaintiff, v. FORD MOTOR COMPANY and Eltra Corp., successor to Electric Autolite Company, Defendants.

Civ. A. No. 28333.

United States District Court, E. D. Michigan, S. D.

April 11, 1973.

COPYRIGHT MATERIAL OMITTED

Allan Neef, Darden, Neef & Heitsch, Detroit, Mich., Adelman & Lavin, Philadelphia, Pa., for plaintiff.

P. Joseph Pascoff, Kerr, Wattles & Russell, Detroit, Mich., for defendant Electric Autolite Co.

F. Bruce Kulp, Ford Motor Co., Dearborn, Mich., for defendant Ford Motor Co.

KAESS, Chief Judge.

This civil action has been brought pursuant to Section 4 of the Clayton Act (15 U.S.C. § 15) to recover treble damages for alleged violations of Sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1, 2) and Section 7 of the Clayton Act (15 U.S.C. § 18).

Defendant Ford has brought this motion for summary judgment. Rule 56, Federal Rules of Civil Procedure.

In the spring of 1959, Albert Neulicht, a chemical engineer, was production manager for Lyntex Corporation, a Massachusetts corporation, which produced vinyl film. At that time, Melvin Sobel was a distributor of vinyl film. In April or May of 1959, plaintiff alleges that these individuals conceived the idea of assisting Defendant Ford in rehabilitating an inoperative calender line at the latter's plastic plant, making arrangements to purchase a portion of the production of unsupported vinyl film from the rehabilitated calender line and selling this film on the open market. To accomplish this goal, Sobel and Neulicht formed plaintiff corporation, and are its sole stockholders.

Negotiations ensued for approximately one year and culminated in a contract dated June 1, 1960, between Plaintiff Zenith Vinyl Fabrics Corp. and Defendant Ford Motor Company. Under the terms of this contract, Ford would sell unsupported vinyl to Zenith. Contrary to plaintiff's assertions, this contract does not give Zenith any right to distribute all vinyl products produced by Ford in the automobile aftermarket. According to plaintiff's complaint, the sole business of Plaintiff Zenith has been to assist Defendant Ford in making its then inoperative calender line productive, supplying Defendant Ford with formulas necessary to make various types of unsupported vinyl film for non-automotive outside sales, training Defendant Ford's personnel in the techniques of the production of unsupported vinyl film on the calender line, purchasing said film from Defendant Ford, and selling same to Zenith's customers on the open market.

Plaintiff claims that, for approximately seventeen (17) months, Albert Neulicht worked constantly with Defendant Ford, the Production Manager of its Plastics Plant, and other officers and employees, to get the calender line operating, did the necessary experimenting and research to learn the proper formulas for the manufacture of unsupported vinyl film for non-automotive purposes, trained Defendant Ford's employees in the operation of the calender line and manufacture of unsupported vinyl film for non-automotive purposes.

On April 12, 1961, Ford and Electric Autolite entered into an agreement whereby they acquired some of the manufacturing facilities, all the customer lists and outstanding agreements with distributors. On November 8, 1961, Zenith entered into a new contract with Ford whereby Zenith was designated national distributor for unsupported vinyl film. The parties operated under this contract until November 2, 1962, at which time Ford terminated the agreement, pursuant to the termination clause in the November 8, 1961 agreement. The reason given for termination was discontinuance of "any definite unsupported film program".

On April 2, 1963, plaintiff filed this antitrust action in the District Court for the Eastern District of Pennsylvania. On May 5, 1963, Zenith voluntarily dismissed the action, but reinstituted it in October, 1965. On March 23, 1966, this action was transferred from the Eastern District of Pennsylvania to this District. Since that time, this case has not been actively pursued, by mutual agreement of the parties, pending the final outcome of a suit by the Government to force Ford to divest itself of Autolite.

Generally, summary judgment should be used sparingly in antitrust litigation. Poller v. Columbia Broadcast System, Inc., 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962); Alles Corp. v. Senco Prods. Inc., 329 F.2d 567 (6th Cir. 1964).

However, this does not mean that Rule 56 of the Federal Rules of Civil Procedure is inapplicable in antitrust cases; and, when appropriate, summary judgment may be granted. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968); Daily Press, Inc. v. United Press International, 412 F.2d 126 (6th Cir. 1969).

With this in mind, the Court will now consider Defendant Ford's motion.

Section 4 of the Clayton Act, 15 U.S. C. § 15, provides:

"Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor * * * and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee."

It is now settled that a private litigant can maintain an action under Section 4 of the Clayton Act (15 U.S.C. A. § 15) for a violation of Section 7. See Gottesman v. General Motors Corp., 414 F.2d 956 (2nd Cir. 1969); Dailey v. Quality School Plan, Inc., 380 F.2d 484 (5th Cir. 1967); Kirihara v. Bendix Corp., 306 F.Supp. 72 (D.C.Haw.1969); Julius M. Ames Co. v. Bostitch, Inc., 240 F.Supp. 521 (D.C.N.Y.1965); Isidor Weinstein Investment Co. v. Hearst Corp., 310 F.Supp. 390 (D.C.Cal.1969); Metropolitan Liquor Co., Inc. v. Heublein, Inc., 305 F.Supp. 946 (D.C.Wis. 1969); this conclusion is also implicit in the Supreme Court's decision in Minnesota Mining & Mfg. Co. v. New Jersey Wood Finishing Co., 381 U.S. 311, 85 S. Ct. 1473, 14 L.Ed.2d 405 (1965).

Section 4 of the Clayton Act expressly restricts the right to sue for treble damages to suits based on injuries which occur "by reason of" antitrust violations. Thus, it has been held that a plaintiff must allege and prove that the violation of the antitrust laws injured his competitive position in the business in which he is or was engaged. See, e.g., United Copper Securities Co. v. Amalgamated Copper Co., 232 F. 574, 577 (2nd Cir. 1916); Westmoreland Asbestos Co. v. Johns-Manville Corp., 30 F.Supp. 389, 391 (S.D.N.Y.1939), aff'd 113 F.2d 114 (2nd Cir. 1940); Monticello Tobacco Co. v. American Tobacco Co., 197 F.2d 629, 632 (2nd Cir.), cert. den. 344 U.S. 875, 73 S.Ct. 168, 97 L.Ed. 678 (1952); Productive Inventions, Inc. v. Trico Prods. Corp., 224 F.2d 678, 679 (2nd Cir. 1955), cert. den. 350 U.S. 936, 76 S.Ct. 301, 100 L.Ed. 818 (1956); SCM Corp. v. Radio Corp. of America, 407 F.2d 166, 171 (2nd Cir.), cert. den. 395 U.S. 943, 89 S.Ct. 2014, 23 L.Ed.2d 461 (1969); Billy Baxter, Inc. v. Coca-Cola Co., 431 F.2d 183, 187 (2nd Cir. 1970), cert. den. 401 U.S. 923, 91 S.Ct. 877, 27 L.Ed.2d 826 (1971); GAF Corporation v. Circle Floor Co., Inc., 463 F.2d 752 (2nd Cir. 1972).

In addition, plaintiff must establish that the alleged violation of the antitrust laws was a "material cause" of or a "substantial factor" in the occurrence of his injury. Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 702, 82 S.Ct. 1404, 8 L.Ed.2d 777 (1962); Bigelow v. RKO Radio Pictures, 327 U.S. 251, 66 S.Ct. 574, 90 L. Ed. 652 (1946); Note, Standing to Sue for Treble Damages Under Section 4 of the Clayton Act, 64 Colum.L.Rev. 570, 575-6 (1964). Moreover, this causal connection must link a specific form of illegal act to a plaintiff engaged in the sort of legitimate activities which the antitrust laws were intended to protect. Certainly, any antitrust violation disrupts the competitive economy to some extent and creates ripples of injury which may be shown to reach individual employees, stockholders, or consumers. However, it has long been held that not all of these have the requisite standing to sue for treble damages and thereby take a leading role in the enforcement of the prohibition in question. See, e. g., Data Digests, Inc. v. Standard & Poor's Corp., 43 F.R.D. 386 (S.D.N.Y.1967). The private action, intended as "an ever-present threat to deter anyone contemplating business behavior in violation of the antitrust laws", Perma Life Mufflers, Inc. v. Int'l Parts Corp., 392 U.S. 134, 139, 88 S.Ct. 1981, 1984, 20 L.Ed. 2d 982 (1968), can only serve as an effective deterrent if the courts are able to administer it with some degree of certainty. Overly broad rules of causation can only lead to a relaxation of the standard of business behavior which is sought to be maintained by the allowance of treble recovery. Consequently, a plaintiff must allege a causative link to his injury which is "direct" rather than "incidental" or which indicates that his business or property was in the "target area" of the defendant's illegal act. SCM Corp. v. Radio Corp. of America, 407 F.2d 166 (2nd Cir.), cert. den. 395 U.S. 943, 89 S.Ct. 2014, 23 L.Ed.2d 461 (1969); Productive Inventions, Inc. v. Trico Products Corp., 224 F.2d 678 (2nd Cir. 1955), cert. den. 350 U.S. 936, 76 S.Ct. 301, 100 L. Ed. 818 (1956). Of course, these rules do not provide talismanic guides to decision, but they do indicate the need to examine the form of violation alleged and the nature of its effect on a plaintiff's own business activities. See, generally, Pollock, Standing to Sue, Remoteness of Injury, and the Passing-On Defense, 32 A.B.A. Antitrust L.J. 5 (1966); Timberlake, Federal Treble Damage Antitrust Actions, §§ 4.02, 4.03 (1965).

This requirement of proof of a causal connection applies to violations of Sections 1 and 2 of the Sherman Act as well as violations of Section 7 of the Clayton Act. GAF Corporation v. Circle Floor Co., Inc., 463 F.2d 752 (2nd Cir. 1972).

At the outset, this...