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INTER-CITY TIRE & AUTO CTR., INC. v. UNIROYAL

December 28, 1988

INTER-CITY TIRE AND AUTO CENTER, INC., Plaintiff-Counter-Defendant,
v.
UNIROYAL, INC., Defendant-Counter-Claimant, and SIEGEL TIRE & BATTERY CORP., and RICHARD L. SIEGEL, Defendants, v. MORRIS ERBESH, TINA ERBESH and E & S REALTY CORP., Additional Parties on Counter-Claim



The opinion of the court was delivered by: POLITAN

 This matter comes before the Court on defendant Uniroyal's motion for summary judgment on liability and on damages. Defendant Siegel Tire has also moved for summary judgment on the antitrust counts of the Complaint and on certain state law tortious interference claims. In addition, defendant Siegel Tire has moved for summary judgment as to liability on the counter-claim. For the reasons outlined herein, Uniroyal's motion for summary judgment on liability is granted; the motion for summary judgment on damages is mooted. Siegel Tire's summary judgment motion is granted. The motion for summary judgment on the counter-claim is denied and the counter-claim is dismissed.

 The facts in this case need not be repeated at length having previously been set forth in various opinions issued by Judge Ackerman, who had presided in this case before it was transferred to me. Suffice it to say that plaintiff Inter-City is engaged in the retail and wholesale sale of automotive tires in the New York - New Jersey market. Defendant-counter-claimant Uniroyal manufactures and sells automotive tires under its own brand name. Defendant Siegel Tire & Battery Corporation and Richard Siegel are Uniroyal's designated distributor for New Jersey and certain New York counties. Inter-City's Complaint alleges antitrust violations and breach of contract theories.

 In 1984, Uniroyal notified Inter-City and other direct purchasers across the country that it was going to utilize exclusive distributors and would no longer supply tires on a direct basis after December 31, 1984. Inter-City was advised to obtain Uniroyal tires from the exclusive distributor for the trade area in which Inter-City retail stores were located; in the instant case, from either Siegel Tire & Battery in New Jersey or Elman Bros. Inc. in New York. Inter-City made arrangements with Elman to purchase all of the Uniroyal tires it needed for its New York and New Jersey stores. Inter-City did not enter into any arrangements with Siegel Tire because the proprietors were not on good terms.

 Prior to the close of 1984, Inter-City placed unusually large orders with Uniroyal, presumably to obtain as many tires as it could before the exclusive distributorship arrangements went into effect. Inter-City did not pay for these tires and Uniroyal instituted suit against Inter-City in New York state court. Inter-City counterclaimed in the New York proceeding with several contract claims and then filed this separate federal antitrust action in this Court. The two actions were then consolidated here and the New York action was dismissed. Earlier in the proceedings, Judge Ackerman granted summary judgment in favor of Uniroyal in connection with the non-payment for the tires.

 Throughout this proceeding, Inter-City has been remiss in its discovery obligations. As a result of such failings, several preclusionary orders were entered by Magistrate Perretti, who was then assigned to the case. These orders have been affirmed by Judge Ackerman. The orders prohibit Inter-City from using at trial any of the documents that were not produced by the May 12, 1986 deadline. In a supplement to the Pretrial Order, Magistrate Perretti further precluded the parties from introducing expert testimony and expert reports at trial. Most of the documents that Inter-City seeks to use to prove damages have been precluded by these orders.

 In the third amended Complaint, plaintiff alleges violations of the Sherman Act, the Robinson-Patman Act, the New Jersey Franchise Act, and common law claims sounding in joint venture and breach of contract. Defendant Uniroyal has moved for summary judgment on these counts on both liability and damages. *fn1"

 According to Rule 56, summary judgment may only be granted if, drawing all inferences in favor of the nonmoving party, there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. See Chipollini v. Spencer Gifts, Inc., 814 F.2d 893, 896 (3d Cir.), cert. dismissed, 483 U.S. 1052, 108 S. Ct. 26, 97 L. Ed. 2d 815 (1987). An issue of fact is "material" only when the dispute is over facts that might affect the outcome of the suit under the governing law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). The requirement of a "genuine" issue of fact means that the evidence is such that a reasonable jury could return a verdict for the non-moving party. See id. Thus, the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment. See id. Summary judgment may be granted against a party who fails to adduce facts sufficient to establish the existence of any element essential to that party's case, for which that party will bear the burden of proof at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). The moving party bears the initial burden of identifying evidence which demonstrates the absence of a genuine issue of material fact. See Celotex, 477 U.S. at 323. Once that burden has been met, the nonmoving party must set forth "specific facts showing that there is a genuine issue for trial," or the factual record will be taken as presented by the moving party and judgment will be entered as a matter of law. See Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986) (quoting Fed.R.Civ.P. 56(e) (emphasis in Matsushita)).

 As the Court in Celotex stated, "one of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses, and we think it should be interpreted in a way that allows it to accomplish this purpose." Celotex, 477 U.S. at 323-34. Fully cognizant of this premise, I now consider the merits of each motion.

 SHERMAN ACT CLAIMS (Counts 1, 3, 5)

 Count 1 of the Complaint alleges an antitrust conspiracy between Uniroyal and Siegel Tire for the purpose of "resale price maintenance and vertical price fixing" in violation of Section 1 of the Sherman Act, 15 U.S.C. sec. 1 (1982). Inter-City contends that this alleged antitrust violation constitutes a per-se violation of Section 1 of the Sherman Act. Summary judgment should be entered on this count because per-se liability is contrary to the Supreme Court's recent decision in Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717, 108 S. Ct. 1515, 99 L. Ed. 2d 808 (1988). In that case, Sharp terminated its dealer relationship with Business Electronics following complaints and threats from another dealer based on the low prices of Business Electronics. In reaching its decision, the Court discussed the limited purpose of the per se rule in the context of vertical restraints and the difficulty manufacturers have avoiding per se liability for "legitimate and competitively useful conduct." Id. at 1521. The Supreme Court concluded that "a vertical restraint is not illegal per se unless it includes some agreement on price or price levels." Id. at 1525.

 Inter-City has pleaded a per se liability case. Having done so, plaintiff must now demonstrate that some agreement to fix prices or price levels existed between Uniroyal and Siegel. In this case, the record is simply devoid of any evidence of an agreement between Uniroyal and Siegel to set particular resale prices. Business Electronics mandates that Uniroyal's conduct be measured under the rule of reason standard. See id. at 1519. Inter-City has not pleaded a rule of reason case and therefore, summary judgment is appropriate on the Sherman Act claims on that ground alone.

 Assuming arguendo, that the Court liberally construes plaintiff's Complaint to encompass the rule of reason standard, summary judgment is still appropriate. Under the rule of Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 53 L. Ed. 2d 568, 97 S. Ct. 2549 (1977), a vertical restraint is not unreasonable unless it impacts on interbrand competition. To establish a restraint on interbrand competition, it must be shown that the manufacturer imposing the restriction has market power. See O.S.C. Corp. v. Apple Computer, Inc., 601 F. Supp. 1274, 1291 n.8 (C.D. Cal. 1985), aff'd. 792 F.2d 1464 (9th Cir. 1986). Without market power, a manufacturer is not in a position to restrict competition regardless of the restraint imposed. See, e.g., Assam Drug Co. v. Miller Brewing Co., 798 F.2d 311, 316 (8th Cir. 1986) ("a finding of no market power precludes any need to further balance the competitive effects of a challenged restraint"). In the instant case, Uniroyal does not have market power and therefore cannot be liable under section 1 of the Sherman Act for the vertical restraint alleged by Inter-City. Uniroyal has submitted declarations which assess their market ...


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