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Nature of Suit Code: 410
Nature of Suit: Antitrust
Cause of Action: 

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PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

SMITH MACHINERY COMPANY, INC., 

Plaintiff-Appellant, 

v. 

HESSTON CORPORATION, 

Defendant-Appellee. 

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JUL 0? 1Qg~ 

ROBERT L. HOECKER 

Clerk 

No. 87-1597 

Appeal from the United States District Court 

for the District of New Mexico 

(D.c. No. crv 82-1299 SC) 

Richard c. Minzner (Joel K. Jacobsen also of Rodey, Dickason, 

Sloan, Akin & Robb, and John P. Eastham, Mary Catherine McCulloch, 

and James L. Rasmussen of Kemp, Smith, Duncan & Hammond, with him 

on the briefs) Albuquerque, New Mexico, for Plaintiff-Appellant. 

Marianne Woodard (Norman S. Thayer also of Sutin, Thayer & Browne, 

with her on the brief) Albuquerque, New Mexico, for DefendantAppellee. 

Before HOLLOWAY, Chief Judge, LOGAN and McWILLIAMS, Circuit 

Judges. 

LOGAN, Circuit Judge. 

Appellate Case: 87-1597 Document: 01019743406 Date Filed: 07/07/1989 Page: 1 
In this appeal, plaintiff Smith Machinery Corporation (Smith) 

argues that the district court improperly granted summary judgment 

against it on claims that Hesston Corporation violated section 1 

of the Sherman Act, 15 u.s.c. § 1, and its New Mexico antitrust 

law counterpart by tying sales of Hesston tractors to sales of 

other Hesston farm machinery, and improperly dismissed its similar 

claim under section 3 of the Clayton Act, 15 U.S.C. § 14. Smith 

also contends that a related New Mexico state court decision 

precluded the federal district court's grant of summary judgment 

on the state claim. 

Smith is a Roswell, New Mexico, dealer of irrigation 

equipment and farm machinery serving the Pecos Valley area. In 

1950, Smith began carrying a line of Hesston farm machinery, 

consisting primarily of hay and forage equipment. Among the most 

popular Hesston products were the windrowers and the big baler. 

Smith also has carried a variety of other agricultural equipment 

lines, including a full line of John Deere products, which has 

been Smith's principal line of farm equipment since 1962. 

In 1977 Fiat Trattori S.p.A. of Italy acquired a controlling 

interest in Hesston. Subsequently, Fiat sought to market its 

tractor in the United States as part of the Hesston product line. 

In 1981 Hesston approached Smith about carrying the new Hesston 

tractors. At the time, Hesston and Smith were parties to a 

distributorship contract requiring Smith to "order, keep on hand 

and display a representative sample of each type of Hesston 

products [sic] applicable to [Smith's] trade area." I R. doc. 93 

exh. A at 1. Smith declined to carry the tractors. According to 

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its president, Smith refused the tractors because it already had 

successfully marketed John Deere tractors, the tractor market in 

the Pecos Valley was so saturated that any sales would be mere 

replacements, any sales of Hesston tractors would cut into John 

Deere sales and would not increase Smith's profits, and Smith's 

marketing efforts with regard to the John Deere tractors would be 

diminished. At no time did Hesston tell Smith it could not 

continue to carry competing lines of products. 

After Smith refused the new tractors, Hesston terminated the 

dealership and entered into an agreement with the local 

International Harvester dealer to carry the Hesston line, 

including its tractors. Smith asserts that had it accepted the 

tractors, it would have incurred approximately $13,000 in costs 

the first year for new parts, training, and other miscellaneous 

expenses associated with the tractors, and would have had to 

expand its showroom to create sufficient display space. 1 

After termination of its dealership, Smith filed suit in a 

New Mexico state district court, alleging, inter alia, violations 

of the New Mexico Antitrust Act. At the close of Smith's case-inchief, the trial judge dismissed the state antitrust claim on the 

ground that representative line requirements are excepted from the 

general proscription of tying arrangements. While Smith appealed 

the decision to the New Mexico Supreme Court, it filed the instant 

1 Allegedly, the new 9ealer was required to take three tractors 

the first year, six tractors the second year, and nine tractors 

the third year. According to a Hesston sales contract, a dealer 

would be required to pay for a tractor nine months after shipment, 

although Hesston maintains that it extended these terms to assist 

dealers not able to make a timely payment. 

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action in federal court, alleging violations of section 1 of the 

Sherman Act and section 3 of the Clayton Act, seeking treble 

damages. Specifically, Smith claimed that Hesston illegally tied 

the sale of its big baler, windrowers, and parts to purchases of 

the new tractors. 

The federal district court held that the state court 

dismissal of the New Mexico antitrust claim operated to bar the 

federal claims on the grounds of res judicata. Subsequently, the 

New Mexico Supreme Court reversed the dismissal of the state 

claim, holding that Smith's proof of Hesston's tying arrangement 

established a prima facie case of a per se antitrust violation. 

Smith Machinery Corp. v. Hesston, Inc., 102 N.M. 245, 694 P.2d 

501, 510 (1985). Based on that decision, this court reversed the 

dismissal of the federal case. See Order No. 83-2550, Sept. 19, 

1985; see also I R. doc. 15. Smith then dismissed the state 

action, adding the state claims to the federal court action on the 

basis of pendent jurisdiction. 

On remand the federal district court, in a thorough 

memorandum opinion, granted Hesston's motion for summary judgment 

on all claims. On the Sherman Act claim, the court reasoned as 

follows: Hesston's distribution practices did not constitute a 

per se violation because Hesston did not prohibit Smith from 

handling competitors' products and thus there was not a 

significant foreclosure of commerce or competition; even if 

Smith's limited resources effectively precluded it from handling 

John Deere tractors the amount of commerce thereby foreclosed was 

not substantial; and, there was no significant danger that Hesston 

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could obtain market power in the tied product market. The court 

also held that the rule of reason was not violated since Hesston's 

tying arrangement actually enhanced competition in the consumer 

market and, again, there was no danger of Hesston acquiring market 

power in the tied product market. Because the New Mexico 

Antitrust Act states that it is to be construed in harmony with 

federal antitrust laws, the court also granted summary judgment on 

the state claim in favor of Hesston. The district court dismissed 

the Clayton Act claim, concluding that absent any actual sale or 

contract for sale of the tied item, relief would not lie under the 

statute. 

I 

Smith first contends that the New Mexico Supreme Court's 

ruling that Smith had presented a prima facie case of a state 

antitrust violation precluded the federal district court from 

granting Hesston summary judgment on the state claim. It urges 

that the doctrines of collateral estoppel, law of the case, and 

stare decisis bar summary judgment for Hesston. The district 

court held that preclusion doctrines are inapplicable in cases in 

which there has not been a final judgment. It also held that the 

law of the case doctrine does not prevent the correction of a 

prior erroneous ruling or apply in cases in which new evidence is 

presented to a court. 

Preliminarily, we observe that any preclusion arguments made 

with regard to the state antitrust claim logically would apply to 

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the Sherman Act claim as well. The relevant state law2 is 

patterned after section 1 of the Sherman Act, and mandates a 

construction "in harmony with judicial interpretations of the 

federal antitrust laws." N.M. Stat. Ann. § 57-1-15; see also 

Allen v. Mccurry, 449 U.S. 90, 105 (1980) (state courts are 

obligated and able to uphold federal law); Marrese v. American 

Academy of Orthopaedic Surgeons, 470 U.S. 373, 380-81 (1985) 

(state court judgment may preclude later action that is within 

federal courts' exclusive jurisdiction). Indeed, in Smith the New 

Mexico Supreme Court based its judgment on federal court decisions 

interpreting the Sherman Act. 694 P.2d at 505-10. 

We think that neither collateral estoppel nor law of the case 

prevented the federal district court from entering summary 

judgment for Hesston on the state and federal antitrust claims. 3 

This court and others, however, have conditioned the invocation 

against a party of collateral estoppel and law of the case on that 

party's prior opportunity to have fully and fairly presented and 

argued its claims. See,~, Kremer v. Chemical Const. Corp., 

456 U.S. 461, 480-81 (1982) (collateral estoppel); Willner v. 

Budig, 848 F.2d 1032, 1034 (10th Cir. 1988) (same), cert. denied, 

109 S. Ct. 840 (1989); Parks v. Poindexter, 723 F.2d 840, 844-45 

2 N.M. Stat. Ann. § 57-1-1 

agreement, combination or 

commerce, any part of which 

state, is unlawful." 

provides that "[e]very contract, 

conspiracy in restraint of trade or 

trade or commerce is within this 

3 Smith's assertion of stare decisis in the preclusion context is 

misplaced since that doctrine goes to the precedential value of a 

prior determination, and not to the narrow inquiry of whether a 

party is precluded from relitigating an issue. Cf. Stevenson v. 

Sears, Roebuck & Co., 713 F.2d 705, 711 (Fed. Cir-.-1983). 

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Appellate Case: 87-1597 Document: 01019743406 Date Filed: 07/07/1989 Page: 6 
(11th Cir. 1984) (collateral estoppel and law of the case); 

Dynalectron Corp. v. United States, 4 Cl. Ct. 424, 431) (law of 

the case), aff'd mem., 758 F.2d 665 (Fed. Cir. 1984). Courts also 

require a prior final judgment, at least on the specific issues 

sought to be foreclosed from relitigation, before a party may 

invoke collateral estoppel or law of the case. See, ~, Eilrich 

v. Remas, 839 F.2d 630, 632 (9th Cir.) (collateral estoppel), 

cert. denied, 109 S. Ct. 60 (1988); R. L. Clark Drilling 

Contractors, Inc. v. Schramm, Inc., 835 F.2d 1306, 1307 n.2 (10th 

Cir. 1987) (law of the case); cf. Employees Own Fed. Credit Union 

v. City of Defiance, 752 F.2d 243, 245 (6th Cir. 1985) (relaxation 

of final judgment rule in collateral estoppel context appropriate 

in civil case when prior decision is "sufficiently firm to be 

accorded conclusive effect''). New Mexico courts impose the ''full 

and fair opportunity to litigate" and "final judgment'' 

requirements on the invocation of collateral estoppel. ~' 

Reeves v. Wimberly, 107 N.M. 231, 755 P.2d 75, 78-79 (Ct. App. 

1988). 

The New Mexico state district court had dismissed Smith's 

action after Smith had presented its case and before Hesston put 

on any evidence. The state supreme court reversed, holding that 

Smith had made out a prima facie case. In holding that Smith had 

presented a prima facie case of a per se antitrust violation, the 

New Mexico Supreme Court stressed that its "review of the relevant 

evidence [was] directed solely at the narrow issue presented and 

[was] not to be construed as a commentary on the ultimate merits 

of the antitrust claim," Smith, 694 P.2d at 509, 510. Further, 

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~the supreme court directed the district court on remand to hold a 

trial and determine "whether Smith's prima facie case [was] 

rebutted or whether any business exceptions [were applicable]." 

Id. at 510. Hesston's opportunity to rebut was frustrated, of 

course, by Smith's dismissal of the state case and its adding the 

state antitrust claim to its federal lawsuit. 

All the New Mexico Supreme Court decided was that Smith had 

made out a prima facie case for a state antitrust violation. 

Arguably by dismissing its case after the Supreme Court ruling and 

before further proceedings the situation in federal court should 

be as if the state suit never had been filed. In any event, when 

the federal court in the instant action considered Hesston's 

motion for summary judgment, it had before it depositions and 

affidavits presented by both parties, as well as trial testimony 

from the state proceeding. The court apparently believed that 

even if Smith had proved a prima facie violation in the state 

action, such proof had been rebutted upon the consideration of a 

complete record. We see no compelling reasons for forbidding the 

district court's exercise of its summary powers merely because a 

different court, finding itself in a wholly different procedural 

posture, thought the plaintiff's case strong enough to withstand 

dismissal before rebuttal evidence was produced. Thus, the 

district court properly entertained Hesston's motion for summary 

judgment. 

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II 

A 

We next consider the district court's grant of summary 

judgment in favor of Hesston on the Sherman Act claim. Smith 

argues that the district court, by comparing Smith's case to 

Hesston's rebuttal evidence, impermissibly weighed competing 

evidence at the summary judgment stage. But as the Supreme Court 

recently has made clear, there is a crucial difference between 

weighing evidence, which a trial judge may not do when ruling on a 

motion for summary judgment, and determining whether there exists 

a genuine issue for trial. In Anderson v. Liberty Lobby, Inc., 

477 U.S. 242, 247-48 (1986), the Court noted that under Fed. R. 

Civ. P. 56(c), "the mere existence of some alleged factual dispute 

. . • will not defeat an otherwise properly supported motion for 

summary judgment; the requirement is that ther'e be no genuine 

issue of material fact." (emphasis in original). In an ordinary 

civil case like the one before us, "[t]he judge's inquiry . 

unavoidably asks whether reasonable jurors could find by a 

preponderance of the evidence that the plaintiff is entitled to a 

verdict." Id. at 252. The district court's memorandum opinion 

indicates that it understood its assigned task. Nothing in the 

record indicates that the court improperly weighed Smith's 

evidence against Hesston's. 

Smith's primary contention is that there was sufficient 

evidence of an illegal tying arrangement to create an issue for 

trial. A tying arrangement has been defined as "an agreement by a 

party to sell one product but only on the condition that the buyer 

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Appellate Case: 87-1597 Document: 01019743406 Date Filed: 07/07/1989 Page: 9 
also purchases a different (or tied) product." Northern Pac. Ry. 

Co. v. United States, 356 U.S. 1, 5 (1958). This case involves a 

tying arrangement known as "full-line" or "representative-line" 

forcing, whereby a manufacturer agrees to license or franchise a 

dealer to sell its products, but only on condition that the dealer 

sell a full or representative line of those products. See Joffe, 

Tying and Exclusive Dealing Arrangements, 589 Practising Law 

Institute/Corporate Handbook Series 643 (1988); see also 

L. Sullivan, Antitrust§ 158, at 457 (1977). 

As a preliminary matter, we note that to establish a 

violation of section 1 of the Sherman Act, the complaining party 

must prove an agreement or concerted activity between separate 

parties to restrain trade--that is, a "contract, combination or 

conspiracy." Fisher v. City of Berkeley, 475 U.S. 260, 266-67 

(1986); McKenzie v. Mercy Hosp. of Independence, Kan., 854 F.2d 

365, 367-68 (10th Cir. 1988). Here, Smith refused to accede to 

Hesston's request to carry its tractors, but a franchisee is 

allowed to "charge a combination between ••. [the franchisor] 

and other franchise dealers, whose acquiescence in [the] firmly 

enforced restraints was induced by 'the communicated danger of 

termination.'" Perma Life Mufflers, Inc. v. International Parts 

Corp., 392 U.S. 134, 142 (1968) (citation omitted); see also Will 

v. Comprehensive Accounting Corp., 776 F.2d 665, 669-70 (7th Cir. 

1985), cert. denied, 475 U.S. 1129 (1986); Black Gold, Ltd. v. 

Rockwool Indus., Inc., 729 F.2d 676, 685-86, and 732 F.2d 779, 780 

(10th Cir.), cert. denied, 469 U.S. 854 (1984). Smith failed, 

however, to allege any sort of concerted action between Hesston 

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and other dealers. See IR. doc. 29 (Second Amended Complaint). 

But Hesston does not here, nor did it at the trial court level, 

argue that this pleading failure warranted dismissal of Smith's 

Sherman Act claim. Thus, we do not decide whether dismissal of 

the Sherman Act count on these grounds would be warranted had 

Hesston raised the issue, and we consider the merits of Smith's 

claim of a tying violation. 4 

B 

The Supreme Court has indicated th~t ''certain tying 

arrangements pose an unacceptable risk of stifling competition and 

therefore are unreasonable ·~ se. "' Jefferson Parish Hosp. 

Dist. No. 2 v. Hyde, 466 U.S. 2, 9 (1984). However, section 1 of 

the Sherman Act only prohibits "[e)very contract, combination 

., or conspiracy, in restraint of trade or commerce." 15 

u.s.c. § 1. Thus, the question oi whether Hesston's alleged line 

forcing constitutes a "tying arrangement" is largely irrelevant. 

See Jefferson Parish, 466 U.S. at 21 n.34. Rather, "[t]he 

legality of [the challenged] conduct depends on its competitive 

consequences, not on whether it can be labeled 'tying."' Id. 

Line forcing, be it full or representative, is a vertical 

nonprice restraint--an agreement between entities at different 

levels of distribution that does not purport to affect prices 

4 On appeal, Smith does point to deposition testimony in the 

record by a Hesston vice-president who admitted testifying in an 

unrelated trial that he was sure some dealers took on Hesston 

tractors under threat of termination, although he had no personal 

knowledge of such an occurrence. The vice-president also had 

admitted that Hesston had a policy of terminating dealers that 

refused to stock the tractors if a replacement dealer in the area 

could be found. 

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charged for the goods. 5 See Business Electronics Corp. v. Sharp 

Electronics Corp., 108 S. Ct. 1515, 1522-23 & n.4 (1988) 

(definition of a "vertical restraint"); see also Easterbrook, 

Vertical Arrangements and the Rule of Reason, 53 Antitrust L.J. 

135, 135 (1984). In its most recent examination of the per se 

illegality of vertical restraints, the Supreme Court held that an 

alleged agreement between a manufacturer and a dealer to terminate 

another dealer due to alleged price cutting was not a per se 

violation of section 1 of the Sherman Act. Sharp, 108 S. Ct. at 

1521, 1525. The Court noted that "per se rules are appropriate 

only for 'conduct that is manifestly anticompetitive,' that is, 

conduct 'that would always or almost always tend to restrict 

competition and decrease output.'" Id. at 1519 (citations 

omitted). Further, in analyzing the vertical nonprice restraint 

at issue in that case the Court was guided by certain premises: 

(1) ordinarily, rule of reason analysis should be employed to 

determine whether a practice violates the Sherman Act; 

(2) departure from the rule of reason must be justified by 

demonstrable economic effect, such as cartel facilitation; 

5 In this particular case, the alleged line forcing might better 

be termed a vertical "arrangement" rather than "restraint" since 

Smith was not prohibited from carrying the product lines of 

competitors as it would be under an exclusive dealing arrangement, 

the classic "vertical restraint." Smith was "restrained," 

however, in the sense that it was obligated to carry a 

representative line of Hesston products and it could not refuse to 

do so without violating the terms of the distributorship contract. 

A "horizontal restraint," on the other hand, represents "an 

agreement among competitors on the way in which they will compete 

with one another" and is often held to be unreasonable as a matter 

of law. NCAA v. Board of Regents, 468 U.S. 85, 99 (1984); see 

also Business Electronics Corp. v. Sharp Electronics Corp., ---rDa 

S. Ct. 1515, 1523 n.4 (1988). 

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(3) antitrust law primarily is concerned with interbrand and not 

intrabrand competition; and (4) in evaluating vertical restraints, 

courts should protect the doctrine of Continental T.V., Inc. v. 

GTE Sylvania Inc., 433 U.S. 36 (1977), which is that vertical 

nonprice restraints such as exclusive territory agreements are not 

illegal per se and should be judged under the rule of reason. 

Sharp, 108 S. Ct. at 1520-21. The Court concluded that "economic 

analysis supports the view, and no precedent opposes it, that a 

vertical restraint is not illegal per se unless it includes some 

agreement on price or price levels." Id. at 1525. 

Taking Sharp as our guide, and viewing the conduct before us 

as a vertical nonprice restraint, Hesston's line requirement is 

not a per se violation of the Sherman Act. Smith has not shown 

·that such an arrangement ~lmost always tends to restrict 

competition and reduce output. Cf. id. at 1519. On the contrary, 

common sense informs us that in most cases when, as here, the 

manufacturer does not· prohibit a dealer from carrying competing 

lines, line forcing enhances interbrand competition by making 

another tractor available for sale to the public. 6 Further, not 

even Smith contends that the line requirement would lower total 

6 In Fox Motors, Inc. v. Mazda Distribs. (Gulf), Inc., 806 F.2d 

953, 957 (10th Cir. 1986), we noted in dictum that procompetitive 

benefits arising from a challenged practice generally are 

disregarded under a per se analysis. However, as we observed 

there, 806 F.2d at 957 n.2, the Supreme Court has indicated that 

"considerable market analysis,'' including an examination of 

procompetitive justifications for a questioned practice, may be 

necessary when determining if a practice meets the elements of the 

per se violation. See NCAA, 468 U.S. at 104 n.26; see also 

Jefferson Parish, 466 U.S. at 34-35 (O'Connor, J., concurring in 

judgment). The instant case is one in which it is difficult to 

discuss why a practice is not anticompetitive without, at the same 

time, discussing why it is procompetitive. 

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output in the market for tractors below pre-existing levels. At 

worst, there simply would be a substitution of one tractor for 

another. 

Smith argues, however, that due to its limited financial 

resources the line requirement would have restricted competition 

because every forced purchase of a Hesston tractor it made 

effectively would have foreclosed the purchase of a John Deere 

tractor. Even if this assertion were true, the argument is 

misplaced. The primary objective of the Sherman Act is to benefit 

consumers by promoting efficient and beneficial competition. See 

NCAA, 468 U.S. at 107; Jefferson Parish, 466 U.S. at 15; Grappone, 

Inc. v. Subaru of New England, Inc., 858 F.2d 792, 794 (1st Cir. 

1988); Westman Comm'n Co. v. Hobart Int'l, Inc., 796 F.2d 1216, 

1220 (10th Cir. 1986), cert. denied, 108 S. Ct. 1728 (1988)~ The 

antitrust laws were designed to protect competition, not 

competitors. Brown Shoe Co. v. United States, 370 U.S. 294, 320 

(1962); Grappone, 858 F.2d at 794. In general, the broader the 

consumers' range of choice, the better off they are. Thus, this 

court has considered alleged antitrust violations "in light of 

[their] effect on consumers, not on competitors." Westman, 796 

F.2d at 1220. To the extent that a manufacturer's distribution 

practices enhance competition in the consumer market, they should 

be encouraged despite their effect on suppliers and distributors 

operating in an intermediate distribution market. Therefore, even. 

if proved, Smith's allegation that Hesston's line requirement 

would restrict its ability to carry and sell as many John Deere 

tractors as it wished does not establish a per se violation of the 

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Sherman Act. Rather, Smith would have to show that Hesston's line 

requirement so restricted the marketing of John Deere products 

that it impeded competition in the consumer market. Cf. Pitchford 

v. Pepi, Inc., 531 F.2d 92, 101 (3d Cir.) ("there can be no 

liability under a full-line forcing count absent a showing of 

foreclosure of competition in a substantial amount of commerce"), 

cert. denied, 426 U.S. 935 (1976); Colorado Pump & Supply Co. v. 

Febco, Inc., 472 F.2d 637, 641 (10th Cir.) ("The mere existence of 

the requirement that the full line be stocked, without additional 

information about its competitive impact, does not suffice to 

establish an unreasonable restraint of trade."), cert. denied, 411 

U.S. 987 (1973). This Smith failed to do. 

According to uncontradicted statistics in Hesston's brief, in 

1982 John Deere sold approximately thirty percent of all farm 

machinery in North America. Deere's share of the North American 

tractor market was estimated to be twenty-seven percent in 1980 

and thirty percent in 1985. If Deere became displeased with the 

number of its tractors being sold by Smith because Smith also sold 

Hesston tractors, it had the market power and resources to 

distribute its products through a different outlet--either through 

another local dealer or by vertically integrating itself. Or, as 

actually happened here, Smith could choose to continue selling 

only Deere tractors and assume the risk that Hesston would take 

its product line to a dealer willing to carry and sell its entire 

line. This is precisely the type of competitive behavior the 

Sherman Act was designed to encourage. In fact, forcing Hesston 

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to forego established distribution channels to introduce a new 

product likely would have an anticompetitive effect. 

It is clear in this case that the line forcing imposed by 

Hesston was being used as a tool to compete, and not to restrain 

competition. Had Hesston not been trying to add a new product to 

its line with an existing distributor, but rather had come to 

Smith initially with its full complement of products including its 

tractor, it freely could have gone elsewhere on Smith's refusal to 

sell the whole line. Similarly, in the existing situation, we see 

no compelling reasons to "restrict the autonomy of independent 

businessmen" when it fosters competitive practices, Westman, 796 

F.2d at 1220, simply because Smith did not wish to disturb its 

current product mix. It may be, as here, that a dealer may suffer 

a loss of profit from not being able to carry every product that 

it wishes. But the Sherman Act does not protect a dealer's right 

to maximize profits. Cf. L. Sullivan, supra p.10, § 158, at 457 

(in the line-forcing context, "[a]bsent a showing of a significant 

foreclosure of competitors, it is no doubt more constructive to 

treat the interests of the manufacturer as adequately 

counterbalancing the dealer's interest in a wider product 

choice"). 

The district court and both parties focused primarily on the 

application of Jefferson Parish to the facts of this case, no 

doubt because Sharp had not been decided at the time of the 

district court's decision. The opinion in Sharp did not mention 

Jefferson Parish, although we believe the analysis in Sharp 

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requires a holding that line forcing is a vertical nonprice 

restraint that is not.illegal per se. 

In our view, there are compelling reasons for making a 

distinction between line forcing, normally viewed as a method of 

competing, and traditional tying practices viewed as serving 

"hardly any purpose beyond the suppression of competition." 

Standard Oil Co. v. United States, 337 U.S. 305-06 (1949). In a 

line forcing situation, where a dealer is serving as an 

intermediate link in a distribution chain, if one manufacturer is 

foreclosed from selling to a dealer because of the arrangement, it 

is likely going to find another way to take its product to market, 

providing a profit potential continues to exist. In such a case, 

there is no ultimate foreclosure to the consumer of a choice of 

goods. In other more traditional tying arrangements there is an 

ultimate foreclosure of choice to the ultimate consumer. See, 

~' Jefferson Parish, 466 U.S. at 5 (anesthesiology tied to use 

of hospital); United States v. Loew's Inc., 371 U.S. 38, 40 (1962) 

(unpopular films tied to feature films); Northern Pac. R. Co., 356 

U.S. at 3 (rail services tied to transfers of land); International 

Salt Co. v. United States, 332 U.S. 392, 393 (1947) (salt tied to 

salt machines). Thus, a foreclosure of choice to an ultimate 

consumer appears to be the principal key to a tie that is illegal 

per se. No such foreclosure occurs or is threatened in a typical 

line forcing situation such as that at bar. 

Having said this, we believe that even if the Court were to 

subject manufacturer line requirements to the traditional tying 

analysis set forth in Jefferson Parish, Hesston's arrangement 

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still would pass per se scrutiny. In Jefferson Parish, the Court 

held that to find a per se violation, a court first must d~termine 

that a substantial amount of commerce is foreclosed under the 

challenged arrangement, and then that it is likely the seller is 

forcing the tied product onto the buyer in an anticompetitive 

manner. 466 U.S. at 15-16. The Court noted that the existence of 

market power in the tying product is a good indication that 

anticompetitive forcing is taking place. Id. at 16-18. As our 

foregoing discussion illustrates, the likelihood that Hesston's 

policy causes anticompetitive forcing is virtually nil. Thus, we 

hold that summary judgment on Smith's per se allegations was 

proper. This, however, does not end our inquiry. If Smith has 

raised an issue of material fact under the rule of reason, summary 

judgment on the Sherman Act and state claim still would have been 

error. 

c 

As stated by the Supreme Court, "the inquiry mandated by the 

Rule of Reason is whether the challenged agreement is one that 

promotes competition or one that suppresses competition." 

National Soc'y of Prof 'l Eng'rs v. United States, 435 U.S. 679, 

691 (1978). In other words, the rule "requires the factfinder to 

decide whether under all the circumstances of the case the 

restrictive practice imposes an unreasonable restraint on 

competition." Arizona v. Maricopa County Medical Soc'y, 457 U.S. 

332, 343 (1982) (footnote omitted). This inquiry normally 

involves an examination of a variety of actual market factors. 

Chicago Bd. of Trade v. United States, 246 U.S. 231, 238 (1918). 

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The plaintiff, however, has the burden of showing that the 

challenged arrangement had an "actual adverse effect on 

competition." Jefferson Parish, 466 U.S. at 29, 31. 

We have no trouble concluding that Smith failed to make a 

sufficient showing in this case. The only evidence of 

"anticompetitive" effect Smith offers, as discussed above, is 

disputed affidavit statements by one of its officers that each 

purchase of a Hesston tractor would preclude the purchase of a 

John Deere tractor. Yet, as long as Hesston's arrangement does 

not preclude John Deere from taking its tractors to market, either 

through Smith or through another distributor, competition has not 

been impaired; to the contrary, it has been enhanced. The fact 

that Smith made a conscious decision to risk the loss of the 

entire Hesston line by refusing the tractors, rather than give up 

some sales of John Deere tractors, indicates that Deere would have 

had no trouble finding a satisfactory outlet for its products. 

Based on the allegations and evidence before the district court, a 

reasonable jury could not have found for Smith on its Sherman Act 

claim and the corresponding state claim. Thus, we hold that the 

district court properly granted Hesston's motion for summary 

judgment. 

III 

Smith also contends that the district court erroneously 

dismissed its claim that Hesston's line requirement violated 

section 3 of the Clayton Act, 15 U.S.C. § 14. Section 3 provides 

in pertinent part that "(i]t shall be unlawful for any person 

engaged in commerce to lease or make a sale or contract for 

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Appellate Case: 87-1597 Document: 01019743406 Date Filed: 07/07/1989 Page: 19 
sale of goods where the effect of such lease, sale, or 

contract for sale • may be to substanti~lly lessen competition 

or tend to create a monopoly in any line of commerce." 15 U.S.C. 

§ 14. The district court relied on this court's decision in Black 

Gold, Ltd. v. Rockwool Industries, Inc., 729 F.2d 676, 685 (10th 

Cir.), cert. denied, 469 U.S. 854 (1984), in which we held that 

section 3 does not cover a manufacturers' alleged wrongful refusal 

to deal with a customer "in the absence of an actual sale or lease 

to the plaintiff." If the requirement of an actual transaction 

applies to sales or leases, it must apply to a contract for sale 

as well. See Ron Tonkin Gran Turismo, Inc. v. Fiat Distribs., 

Inc., 637 F.2d 1376, 1389 (9th Cir.) ("Section 3 of the Clayton 

Act has no application in the absence of an executed agreement"), 

cert. denied, 454 U.S. 831 (1981). 

Smith strenuously argues that an actual contract for sale did 

exist between Hesston and itself at the time Hesston attempted to 

enforce the line-requirement provision· of the distributorship 

agreement. In reality, however, what existed between the two 

parties at that time was not a contract for sale of the "tied" 

goods (i.e. the tractors), but rather a general distributorship 

agreement obliging Smith to carry a representative line of Hesston 

products. Smith refused to purchase any of the tractors. Thus, 

no purchase order for the tractors, which would have constituted a 

sales contract, was. ever executed by either party. A mere 

franchise agreement, defining general terms and obligations of the 

relationship, does not rise to the level of an executed contract 

for sale as required by section 3. 

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This result may seem at odds with the purposes underlying the 

antitrust laws considering, as Smith argues, that a person would 

need to engage in "unlawful" sales in order to invoke the 

protection of section 3. However, as noted in Black Gold, 729 

F.2d at 685, section 1 of the Sherman Act has been interpreted to 

cover wrongful refusals to deal. We do not interpret section 3 of 

the Clayton Act as providing a cumulative remedy, particularly 

when, at least for allegations of unlawful tying arrangements, the 

required showings under both the Sherman and Clayton Act are 

identical. See id. at 684 n.5. The district court properly 

dismissed Smith's Clayton Act claim. 

AFFIRMED. 

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OFFICE OF THE CLERK 

United States Court of Appeals for the Tenth Circuit 

C-404 United States Courthouse 

1929 Stout Street 

Denver Colorado 80294 

July 20, 1989 

TO: ALL RECIPIENTS OF THE CAPTIONED OPINION 

RE: 87-1597, Smith Machinery Company v. Heston Corporation 

Attached is a corrected page 6 to the opinion authored 

by Judge Logan filed on July 7, 1989. The seventh line from the 

bottom has been amended to delete the word however. 

Very truly yours, 

ROBERT L. HOECKER, Clerk 

Enclosure 

Appellate Case: 87-1597 Document: 01019743406 Date Filed: 07/07/1989 Page: 22 
the Sherman Act claim as well. The relevant state law2 is 

patterned after section 1 of the Sherman Act, and mandates a 

construction "in harmony with judicial interpretations. of the 

federal antitrust laws." N.M. Stat. Ann. § 57-1-15; see also 

Allen v. Mccurry, 449 U.S. 90, 105 (1980) (state courts are 

obligated and able to uphold federal law); Marrese v. American 

Academy of Orthopaedic Surgeons, 470 U.S. 373, 380-81 (1985) 

(state court judgment may preclude later action that is within 

federal courts' exclusive jurisdiction). Indeed, in Smith the New 

Mexico Supreme Court based its judgment on federal court decisions 

interpreting the Sherman Act. 694 P.2d at 505-10. 

We think that neither collateral estoppel nor law of the case 

prevented the federal district court from entering summary 

judgment for Hesston on the state and federal antitrust claims. 3 

This court and others have conditioned the invocation against a 

party of collateral estoppel and law of the case on that party's 

prior opportunity to have fully and fairly presented and argued 

its claims. See,~' Kremer v. Chemical Const. Corp., 456 U.S. 

461, 480-81 (1982) (collateral estoppel); Willner v. Budig, 848 

F.2d 1032, 1034 (10th Cir. 1988) (same), cert. denied, 109 S. Ct. 

840 (1989); Parks v. Poindexter, 723 F.2d 840, 844-45 

2 N.M. Stat. Ann. § 57-1-1 

agreement, combination or 

commerce, any part of which 

state, is unlawful." 

provides that "[e]very contract, 

conspiracy in restraint of trade or 

trade or commerce is within this 

3 Smith's assertion of stare decisis in the preclusion context is 

misplaced since that doctrine goes to the precedential value of a 

prior determination, and not to the narrow inquiry of whether a 

party is precluded from relitigating an issue. Cf. Stevenson v. 

Sears, Roebuck & Co., 713 F.2d 705, 711 (Fed. Cir-.-1983). 

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