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MICHAEL HALEBIAN N.J., INC. v. ROPPE RUBBER CORP.

June 12, 1989

MICHAEL HALEBIAN N.J., INC., Plaintiff,
v.
ROPPE RUBBER CORPORATION, et al., Defendants



The opinion of the court was delivered by: ACKERMAN

 HAROLD A. ACKERMAN, UNITED STATES DISTRICT JUDGE

 THE COURT: On November 29, 1988, plaintiff Michael Halebian, N.J. Inc., filed its amended complaint against defendants Roppe Rubber Corp., Salesmaster, Inc., J. Bernardo Distributors, Inc. and Allstate Rubber Company, Inc., in which it alleged that the defendants, either singly or collectively, violated the state and federal antitrust laws, engaged in unfair competition and breach of contract, tortiously interfered with plaintiff's prospective economic advantage and induced the breach of contract. On February 22, 1989, plaintiff consented to dismiss its claims against Allstate. On February 3rd and 27th and March 3, 1989, defendants Roppe, Salesmaster and Bernardo filed their respective motions for summary judgment.

 Summary judgment may be granted if, drawing all inferences in favor of the nonmovant, the pleadings, affidavits and admissions on file demonstrate that there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Chipollini v. Spencer Gifts, 814 F.2d 893, 896 (3rd Cir.), cert. dism'd, 483 U.S. 1052, 108 S. Ct. 26, 97 L. Ed. 2d 815 (1987). Put differently, "summary judgment may be granted if the movant shows that there exists no genuine issues of material fact that would permit a reasonable jury to find for the nonmoving party." See Miller v. Indiana Hospital, 843 F.2d 139, 143 (3d Cir.), cert. denied, 488 U.S. 870, 109 S. Ct. 178, 102 L. Ed. 2d 147 (1988). An issue is "genuine" if a reasonable jury could possibly hold in the nonmovant's favor with regard to that issue. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); United States v. 225 Cartons, et al., 871 F.2d 409, 419 (3d Cir. 1989). A fact is material if it influences the outcome of the legal issue under the governing substantive law. See Anderson, cited supra, at 248. Hence, a material fact, as the Supreme Court in Anderson pointed out, is identified by reference to the substantive law. Id.

 The moving party bears the initial burden of identifying admissible evidence that demonstrates the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Once that burden has been met, the nonmoving party must come forward with evidence, while not necessarily presented in an admissible form, which shows that there is a genuine issue for trial, or it will be defeated on the motion. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986); Federal Rule of Civil Procedure 56(e).

 Since this matter is before me on motions of defendants for summary judgment, I shall view the factual record before the Court in a light most favorable to the nonmoving plaintiff. See T. J. Trauner Associates v. Cooper Benton, et al., 820 F.2d 643 (3d Cir. 1987).

 Viewing the facts in this way, the record before the Court reveals that plaintiff, Michael Halebian N.J. ("Halebian") is a New Jersey based distributor of, inter alia, flooring products manufactured by companies such as Mercer Plastics and Johnson Rubber. See plaintiff's response to Allstate's Interrogatory No. 23 and Salesmaster's Interrogatory No. 2. It is a major distributor of such products and the largest in New Jersey. In all but one instance plaintiff purchased its stock from manufacturers rather than distributors, and sells its merchandise on a nonretail basis. See Mr. Halebian's deposition at Page 639; plaintiff's response to Salesmaster's Interrogatory No. 9(b).

 Defendant Roppe Rubber Company ("Roppe"), an Ohio based company, which has manufacturing facilities in Ohio and Florida and produces, among other products, rubber cove base. See the deposition of Frederick Jacobs at Page 8. Cove base is the molding attached at the intersection of a wall and the floor in the interior of a building. At least twelve other companies manufacture this product. See plaintiff's response to both Salesmaster's Interrogatory No. 9 and Allstate's Interrogatory No. 12.

 Roppe sells its product through a system of independent authorized distributors whose clients are generally architects, contractors and builders. See Mr. Jacobs' affidavit at Paragraphs 1-4. Prior to 1984, Roppe's only distributor in the New York-New Jersey Metropolitan Area was Allstate, which is located in Ozone Park, New York. In 1984, Roppe granted a distributorship to Salesmaster, located in Westbury, Long Island. See the affidavit of Steven Kurtz, dated February 24, 1989, Paragraphs 1, 4-5. Roppe considers these two distributors as assigned to the New York-New Jersey Metropolitan Area. Mr. Halebian describes these entities as being among the principle distributors of floor products and that Salesmaster and Halebian are among the largest. See Mr. Halebian's deposition at 117-20, 123-24.

 While the distributors state that they were never assigned a territory or told to restrict their sales to a particular geographical area, see deposition of Mr. Kurtz at 114; Mr. Jacobs at 67; Mr. Bernardo at 43-44; Mr. Gilbert Szabo at 63, 69, Roppe apparently envisioned that its distributors would sell its products to the areas which they could most effectively service. See Jacobs' affidavit at Paragraph 2; Roppe's response to Plaintiff's Interrogatories No. 1, 6. The record reflects that Roppe distributors were expected to carry the full line of products, make certain presentations to promote the product, provide samples and install and maintain the base and resolve warranty claims and complaints. In light of these performance requirements, Roppe believed that its distributors had "more or less defined trading territory." See deposition of Gilbert Szabo at 81-82.

 Roppe frowns upon sales by unauthorized distributors since they are not trained in the installation and maintenance of the product and secure sales by virtue of the services that authorized distributors provide. By "free-riding" on the efforts of authorized dealers, unauthorized distributors deprive authorized distributors of sales they might otherwise obtain.

 A central issue in this case is whether or not Roppe had a uniform policy against sales by authorized distributors to unauthorized distributors or Roppe products for distribution in other geographical areas. This type of selling is known as transhipping. When such sales occur, Roppe contends that the unauthorized distributor, or bootlegger, acquires cove base in one territory for distribution in another and reaps the benefits from the sales and promotional efforts of authorized distributors in that second territory. See Jacobs' affidavit at Paragraphs 3-4.

 According to Steven Kurtz, who is the president of Salesmaster:

 
"I understood that distributors like Salesmaster are not to sell to . . . distributors who sell or acquire a product through unauthorized channels for distribution in areas already secured by authorized dealers."

 Kurtz affidavit at Paragraph 6. As stated previously, Kurtz acknowledged, however, that he was never formally assigned a territory. See his deposition at Page 114.

 Apparently, Mr. Jacobs, vice president of Roppe, contends that Roppe had a policy that prohibits distributors from selling Roppe products to unauthorized subdistributors. See his affidavit at Paragraph 2. See also his deposition at 36-38, in which he stated that in 1984, Roppe had a policy pursuant to which "sales were not to be made to unauthorized distributors outside his territory," and that authorized distributors were to "concentrate their sales efforts within their primary area of responsibility," and were to inform Roppe of subdistributor-arrangements established in a distributor's territory. See Mr. Jacobs' deposition at 38. As noted above, however, the representatives of various distributors state that they were never formally apprised of such policies but rather assumed that there were limitations with respect to the territory they were to or had the ability to service.

 On various occasions since 1983, plaintiff has asked to become a Roppe distributor. See plaintiff's response to both Allstate Interrogatory Nos. 11, 24, 27 and 28, and Salesmaster's Interrogatories Nos. 21, 25, as well as Mr. Halebian's deposition at Page 636. According to Michael Halebian, such a distributorship is important because his company has been otherwise unable to provide its customers with Roppe cove base, "the base of choice," because of its quality and price, and as a result those customers must purchase the products from Salesmaster and/or Allstate, thereby giving those entities access to customers who would not otherwise purchase any products from them. See plaintiff's response to Roppe Interrogatory No. 14; Mr. Halebian's certification, dated April 10, 1989, at Paragraphs 4-5; Mr. Szabo's deposition at 31-38; plaintiff's response to Allstate's Interrogatories Nos. 13, 14, 20 and 28; deposition of Mr. Fred Jacobs at 14.

 In its attempt to obtain a Roppe distributorship, by letter dated April 9, 1984, Michael Halebian, Sr. wrote Roppe's president, Donald Miller, regarding Halebian's interest in serving as a Roppe distributor and its view that it had the ability to handle the product. In response, by letter dated May 5, 1984, Mr. Miller denied Halebian's request on the ground that

 
"if we were to sell to [Halebian] that action could have a devastating effect on Allstate. We are their major line. Twenty years ago we could not find a distributor for our products in the New York City area. Allstate took a chance on Roppe. . . . The problem is that adding a distributor of your size could cause too many serious problems at this time."

 Interestingly, later, in 1984, Salesmaster became Roppe's second distributor in the New York area, purportedly based on Roppe's "need." See Mr. Jacobs' deposition at 67.

 Following Roppe's unilateral refusals to grant plaintiff's request for a distributorship, in 1985, plaintiff attempted to purchase Roppe cove base from Salesmaster. See plaintiff's response to Salesmaster Interrogatory No. 24; Mr. Jacobs' affidavit at Paragraph 6. Apparently, plaintiff did not purchase any products from Salesmaster.

 Subsequently, in December of 1986, J. Bernardo Distributors sought to sell cove base to other distributors. Mr. Bernardo first contacted Tabor Company, which is located in Kenilworth, New Jersey. See deposition of Mr. Joseph Bernardo at 49. Tabor's president, Jack Sharpe, declined the offer but informed Mr. Bernardo that Halebian was interested in obtaining Roppe products. See Mr. Halebian's deposition at 151-53. Thereafter, Halebian learned of Bernardo's interest in selling Roppe cove base to other distributors, and Harry Chakmakian of Halebian called Bernardo, informed him that Halebian had been unsuccessful in its attempts to obtain a Roppe distributorship, and was interested in purchasing Roppe base. During that call, the parties arranged to meet to discuss the proposed purchases in mid-January, 1987, during the trade's "market week" convention in Atlanta, Georgia.

 Mr. Halebian recalled that at their meeting in Georgia

 
"I told [Bernardo] that we could possibly sell half a million dollars worth a year, and if he made a ten percent profit, that would mean $ 50,000 a year profit to him, so he mentioned that he might have a problem with the money, and I told him I would pay him as soon as I got his invoice. He was very interested. We were interested, and then he gave me a price.
 
* * * *
 
He gave me his price list, less 22 percent.
 
* * * *
 
. . . he was looking to sell and we were looking to buy, so we negotiated a deal, which wasn't a firm deal until it was confirmed in writing."

 On this point, the following examination ensued at his deposition:

 
"Question: Why do you say it was not a firm deal until he confirmed it in writing?
 
"Answer: Because I was asking for 22, and he wanted to give me 20.
 
"Question: Was anything else left open?
 
"Answer: No."

 Deposition of Michael Halebian at 159-60, 163-65.

 With respect to delivery, Bernardo told Halebian that Bernardo

 
"comes to our area every two or three weeks for the pickup of tackless and other items."

 See Id. at 62. There were no discussions regarding Bernardo's transportation capacity.

 As to the volume of sales, Mr. Halebian initially told Bernardo to expect Halebian to request 500 cartons. See Id. at 164. On this point, the following colloquy ensued:

 
"Question: Did you make any commitment to him, that you would maintain that kind of volume?
 
"Answer: That was an estimated figure that I gave him which I thought I could keep.
 
"Question: Did you promise him that you would buy a half million dollars from him a year?
 
"Answer: I didn't promise him, no.
 
* * * *
 
"Question: Did you promise him that you would buy any particular volume from him?
 
"Answer: No."

 See Id. at 167-68. But see deposition of Mr. Bernardo at 63 where he stated that Halebian never indicated during these conversations the amount it would purchase.

 With respect to the duration of this purchasing arrangement, Mr. Halebian testified that

 
"Answer: As far as I know, it was as long as we wanted.
 
"Question: Was it terminable by Mr. Bernardo at any time?
 
"Answer: That's not the understanding I had.
 
"Question: Was the understanding that it would last forever, as long as you wanted to buy?
 
"Answer: Yes.
 
"Question: As long as you were willing to submit orders and pay for them, Mr. Bernardo agreed he would fill them. Is that correct?
 
"Answer: Right.
 
"Question: And that would go on until the end of time?
 
"Answer: I imagine so.
 
"Question: Did you consider that Mr. Bernardo at any point would have the right to get out of the deal?
 
"Answer: As long as it was done legally, I would have no choice."

 See Mr. Halebian's deposition at 165-66. Later in his deposition, a related exchange ensued:

 
"Question: Did you consider that you had any obligation to buy all of the Roppe product that you wanted from Bernardo?
 
"Answer: What kind of obligation?
 
"Question: Well, did you have an agreement with him that you were going to buy all your Roppe product from him?
 
"Answer: I was going to buy all my Roppe products from him, yes.
 
"Question: If that were so how could you then think that you might be able to get it directly from Roppe? That would cut ...

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