56. Plaintiff has cross-moved for summary judgment alleging that the undisputed facts at bar establish a prima facie case of illegal tying and that, therefore, it is entitled to a judicial declaration that defendants' conduct is a per se violation of the federal antitrust laws. Jurisdiction over this dispute is premised both on diversity of citizenship, 28 U.S.C. § 1332, and a provision of the United States Code vesting the district courts with original jurisdiction over matters pertaining to the federal antitrust laws, 28 U.S.C. § 1337. For the reasons set forth below, we hereby deny both defendants' motion for dismissal of Count I and plaintiff's cross-motion for summary judgment.
II. FACTS AND PROCEDURE
Plaintiff William Cohen & Son, Inc., d/b/a Quality Foods is a New Jersey corporation which manufactures sandwich steak meats and other portion control meat products, and if specially requested, sells seasoned marinated steak sandwich meats. Defendant All American Hero, Inc. (hereinafter "Hero") is an operator of retail steak sandwich shops, which are either company-owned or operated by franchisees. Defendant Food Distributors, Inc. (hereinafter "FDI") is an affiliate of Hero and functions as the sole distributor of sandwich steaks to Hero's franchisees.
Approximately five years ago, Hero solicited the services of plaintiff for the purpose of developing and manufacturing a steak sandwich "with certain flavoring added to produce a product with a distinct and identifiable flavor which would be sold by [Hero's] franchisees." (See Plaintiff's Complaint at para. 9). The by-product of this union of sliced meat and special spices would be a carnivorous creation known to consumers as the "All American Hero Steak," a culinary concoction which would appear prominently on the menus of Hero's franchisees nationwide. The Complaint alleges that at the time plaintiff and Hero entered into their business relationship, defendant Hero formed FDI to act as the sole distributor of steak meat to its franchisees. Pursuant to the restrictive covenants of their franchise agreements, franchisees were required to purchase all of their steak meats exclusively from FDI, which established a telephone line and number on the plaintiff's premises for just such a purpose. The Complaint alleges that the sole function of FDI was to mark-up the cost of plaintiff's sandwich meats before sale to the franchisees. (See Plaintiff's Complaint at para. 10).
After a flavorful five-year business relationship during which plaintiff purportedly served as the sole manufacturer of the All American Hero Steak Sandwich, the union grew rancid. In or around July, 1987, plaintiff notified Hero of its decision to terminate the latter's line of credit because of an alleged accrued arrearage in the amount of $ 99,264.15, excluding interest charges. Purportedly as a result of plaintiff's refusal to extend further credit, Hero instructed its franchisees to terminate all business dealings with plaintiff and to place all further steak sandwich orders with FDI through a Florida telephone number.
On August 24, 1987, plaintiff filed suit in this court alleging violations of the federal antitrust laws, tortious interference with business relationship and breach of contract. Contemporaneous with the filing of their responsive pleadings, defendants moved to dismiss or, in the alternative, for summary judgment on Count I of the Complaint, which alleges the formation of an illegal tying arrangement designed to foreclose Hero's franchisees from access to the wholesale steak market in purported violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, and Section 4 of the Clayton Act, 15 U.S.C. § 15.
Soon thereafter, plaintiff cross-moved for summary judgment on Count I on the ground that its Complaint contains sufficient factual allegations to warrant a judgment on the pleadings. On June 3, 1988, plaintiff was granted leave to amend its Complaint to join Hero U.S.A., Inc. and Alphonso Perez as co-defendants and to include an additional count alleging a claim for fraudulent conveyance of assets.
Dismissal of a complaint, or of a claim in a complaint, for failure to state a claim is permissible only when it appears "beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 44-45, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); Bryson v. Brand Insulations, Inc., 621 F.2d 556, 559 (3d Cir. 1980); Fed. R. Civ. P. 12(b)(6). On a motion to dismiss the complaint, the court must review plaintiffs' allegations in the light most favorable to them, and draw all reasonable inferences in their favor. Bryson, supra; Mortensen v. First Federal Savings and Loan Association, 549 F.2d 884, 891 (3d Cir. 1977). Despite the liberal pleading requirements, the court need only accept the truth of facts. "Conclusory allegations, unsupported by facts, cannot withstand a motion to dismiss." See County of Cook v. MidCon Corp., 574 F. Supp. 902, 920 (N.D. Ill. 1983), aff'd 773 F.2d 892 (7th Cir. 1985).
Alternatively, Fed.R.Civ.P. 56(c) provides that summary judgment may be granted when the materials of record "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Hersh v. Allen Prods. Co., Inc., 789 F.2d 230, 232 (3d Cir. 1986); Lang v. New York Life Insurance Co., 721 F.2d 118 (3d Cir. 1983). In deciding whether an issue of material fact does exist, the court is required to view all doubt in favor of the non-moving party. Meyer v. Riegel Prods. Corp., 720 F.2d 303, 307 (3d Cir. 1983), cert. denied, 465 U.S. 1091, 104 S. Ct. 2144, 79 L. Ed. 2d 910 (1984); Knoll v. Springfield Township School District, 699 F.2d 137, 145 (3d Cir. 1983); Smith v. Pittsburgh Gage and Supply Co., 464 F.2d 870, 874 (3d Cir. 1972). The threshold inquiry is whether there are genuine issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986). The Supreme Court has interpreted Fed. R. Civ. P. 56(c) as mandating:
. . . the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.
Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986). Thus, if the plaintiff's evidence is merely "colorable" or is "not significantly probative," summary judgment may be granted. Anderson v. Liberty Lobby, Inc., 106 S. Ct. at 2511.
A tying arrangement is one in which the availability of one item (the "tying" item) is conditioned upon the purchase or rental of another item (the "tied" item). Such an arrangement exists where, for example, a manufacturer of copying machines (the "tying" item) conditions the sale of its machines on the buyer's agreement to purchase all the paper (the "tied" item) used in the machine from the seller. The principal dangers of a tie-in include the denial of free access by competitors to the market for the tied product and the coercion of purchasers to forego their free choice between competing products. Northern Pacific Railway Co. v. United States, 356 U.S. 1, 6, 2 L. Ed. 2d 545, 78 S. Ct. 514 (1958).
It has been long recognized that certain tying arrangements "pose an unacceptable risk of stifling competition and therefore are unreasonable per se." Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2, 9, 80 L. Ed. 2d 2, 104 S. Ct. 1551 (1984). In other words, a plaintiff alleging an illegal tying arrangement need not demonstrate that the effects of the tie are unreasonable, as he would normally be required to do in a suit brought under the Sherman and Clayton Acts. Thus, absent some legitimate business justification for the tying arrangement, a plaintiff who satisfies his burden of proving its existence is entitled to judgment as a matter of law. Kentucky Fried Chicken v. Diversified Packaging, 549 F.2d 368, 375 (5th Cir. 1977).
However, although tying arrangements have been viewed traditionally as presumptively illegal, not all refusals to sell products separately can be said to restrain competition. The Supreme Court has concluded that:
If each of the products may be purchased separately in a competitive market, one seller's decision to sell the two in a single package imposes no unreasonable restraint on either market, particularly if competing suppliers are free to sell either the entire package or its several parts.