Revised August 7, 1998

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 97-11218

METRO FORD TRUCK SALES, INC.,

Plaintiff-Appellant-Appellee,

versus

FORD MOTOR COMPANY,

Defendant Counter-Defendant/Third-Party

Plaintiff-Appellee/Appellant,

DUANE KUPPER, ERIC MAGNUS,

MIKE STECKLER,

Defendants-Appellants,

versus

DANIEL H. FOLEY,

Counter Claimant/Third-Party Defendant-Appellee.

Appeal from the United States District Court

For the Northern District of Texas

June 26, 1998

Before POLITZ, Chief Judge, REYNALDO G. GARZA and DENNIS, Circuit Judges.

POLITZ, Chief Judge:

Metro Ford Truck Sales, Inc. appeals an adverse summary judgment on its
1

 Sherman Act, 15 U.S.C. § 1, and Robinson-Patman Act, 15 U.S.C. § 13(a).

2

 18 U.S.C. §§ 1961-1968.

2

federal antitrust claims.1 Ford Motor Company, Eric Magnus, Mike Steckler, and

Duane Kupper appeal the remand oftheirthird-party claim against Daniel H. Foley,

Jr. undertheRacketeer Influenced and Corrupt Organizations Act.2 For the reasons

assigned, we affirm.

BACKGROUND

Ford is engaged in the manufacture of various types of vehicles, including

heavy, medium, and light duty trucks. At all pertinent times, Metro was a motor

vehicle dealership licensed to sell and service Ford trucks, and Foley was the

dealer-principal. The relationship between Ford and Metro was governed by Ford

Truck and Ford Heavy Duty Truck Sales and Service Agreements.

The focus of this action is a pricing program implemented by Ford, known

as Competitive Price Assistance. This program was used to reduce the wholesale

price of a truck to authorized Ford medium and heavy duty truck dealers. During

the 1990-94 period at issue, all Ford medium and heavy truck dealerships were

eligible to receive, on every truck, a base level of CPA called “Sales Advantage.”

Sales Advantage CPA was obtained by calling Ford’s CPA Hotline, and giving the

operator basic information about the sale, including the customer’s name, the
3

vehicle specifications, and the vehicle options.

In situations where the sales advantage CPA was insufficient, further

procedures permitted a dealer to request additional price reductions, known as

“Appeal CPA.” The appeal process was initiated when a dealer submitted a CPA

appeal form by facsimile to Ford’s CPA Central. To justify the need for an Appeal

CPA, a dealer had to provide information about the competitive situation

surrounding the particular transaction at stake. Ford then evaluated the appeal,

along with any additional information it had about the customer, to ensure that all

Ford dealers bidding the same customer received an equal CPA, and that all Ford

dealers could meet the competition from other original equipment manufacturers.

Ford thereafter advised the dealer about the amount of additional CPA, if any, that

would be allowed.

SpecializedCPA also existed forlarge volume purchasers. This CPA usually

was at a predetermined amount and could be obtained simply by calling the CPA

Hotline and providing the customer’s name and commitment number. Because

these customers attracted so much competition, and ordered such a large volume

of trucks, the amount of CPA was made readily available, alleviating the need for

the dealer to demonstrate individually a competitive situation or to initiate a CPA

appeal.
4

In response to complaints by another dealer that Metro was obtaining more

CPA on bids to the same customer, Ford conducted an audit of certain sales Metro

made using the CPA program. Ford concluded that Metro had been applying for

CPA in the name of one customer, while actually selling the trucks to someone

else; thus receiving more CPA than that to which it was entitled. Metro conceded

that it sometimes misrepresented customers when claiming CPA, but alleged that

Ford representatives instructed it to claim CPA in the name of its large volume

purchasers when the situation warranted CPA beyond Sales Advantage CPA. Ford

employees, not surprisingly, denied that Metro was so instructed or that they had

knowledge of Metro’s practice prior to the audit. Accordingly, Ford determined

to charge back the amount of CPA obtained by Metro on the misrepresented

transactions, and to pursue termination of Metro’s franchise agreements.

To prevent the threatened charge back orterminations, Metro filed the instant

action in state court,seeking injunctive relief and asserting variousstate law claims

against Ford and Ford employees Kupper, Magnus, and Steckler (hereinafter

collectively referred to as “Ford”). Ford filed counterclaims against Metro and a

third-party petition against Foley, alleging several causes of action understate law.

Thereafter Metro filed an amended petition, which included a claim against Ford

for price discrimination under the Texas Antitrust Act, and Foley filed a
5

counterclaim against Ford for intentional infliction of emotional distress.

Ford removed the action to federal court on the basisthat the Texas Antitrust

Act does not prohibit price discrimination and, therefore, Metro’s antitrust claim

for price discrimination could arise, if at all, only under the federal RobinsonPatman Act, conferring federal question jurisdiction. The district court agreed with

the basis for removal and denied Metro’s motion to remand. Metro thereafter

amended its complaint to assert specific claims for price discrimination under §

2(a) of the Robinson-Patman Act and for vertical price fixing under § 1 of the

Sherman Act, and Ford amended its third-party complaint against Foley to include

a RICO claim.

All parties subsequently moved for summary judgment. The district court

granted Ford’s motion for summary judgment on Metro’s federal antitrust claims.

Finding that state law predominated and a substantial overlap existed, the district

court remanded the remaining state law claims, as well as the third-party RICO

claim, to state court. Both Metro and Ford timely appealed.

ANALYSIS

Metro contends that the district court erred in (1) denying leave to designate

experts and file expert reports beyond the scheduling order deadline; and (2)

granting summary judgment in favor of Ford on its Sherman Act and Robinson-
3 Geiserman v. MacDonald, 893 F.2d 787 (5th Cir. 1990).

4

Id. at 791.

6

Patman Act claims. In its cross-appeal, Ford contends that the district court erred

in remanding its third-party RICO claim, as well as the pendent state law claims.

Metro’sfirst argument on appeal is that the district court erred in denying its

motion for leave to designate experts and file expert reports out-of-time, or to

recognize its supplemental disclosures. We review a trial court’s decision to

exclude expert witnesses as a means of enforcing a pretrial order under the abuse

of discretion standard.3 In so doing, we consider: “(1) the explanation for the

failure to identify the witness; (2) the importance of the testimony; (3) potential

prejudice in allowing the testimony; and (4) the availability of a continuance to

cure such prejudice.”4

As a preliminary matter, we note that it is only the ruling on one expert,

Dr. Keith Leffler, that is at issue. Absent from Metro’s trial motion and its

argument on appeal, issufficient justification for the late designation of this expert

witness. Metro essentially complains that Ford failed to provide supplemental

discovery. Although this case had been pending for well over two years, and the

scheduling order deadlines had been extended previously, Metro did not timely

raise this issue in the trial court.
5 Sierra Club v. Cedar Point Oil Co., 73 F.3d 546 (5th Cir. 1996).

6 We note that Metro appears to be urging this issue only in anticipation ofreversal

of the grant of summary judgment. Metro argued below that the need for experts could not

be determined until after the district court ruled on the pending summary judgment motions.

Because Metro is not claiming that thisissue impacted itssummary judgment positions, and

in light of our decision affirming the grant ofsame, infra, we perceive no prejudice to Metro

asto this claim. See Liquid Drill,Inc. v. U.S. Turnkey Exploration, Inc., 48 F.3d 927 (5th

Cir. 1995).

7

Nonetheless, Metro contends that the mere one week delay in designating

this expert was nominal and resulted in no prejudice, mandating the grant of its

motion. Metro fails, however, to note the lack of an accompanying written report,

as required by the scheduling order and Rule 26(a)(2)(B), which results,

necessarily, in the conclusion that the expert designation deadline was not merely

one week late asit contends. Instead, Metro urges this court to recognize the filing

of Dr. Leffler’s report as timely under the supplemental disclosure deadline some

three monthslater. We decline to do so. The purpose of supplementary disclosures

is just that -- to supplement. Such disclosures are not intended to provide an

extension of the expert designation and report production deadline.5 We therefore

hold that the district court did not abuse its discretion in refusing to modify the

scheduling order and in enforcing the time deadlines.6

In its remaining arguments on appeal, Metro contends that the district court

erred in granting summary judgment in favor of Ford on itsfederal antitrust claims.
7 Martin v. Memorial Hosp. at Gulfport, 130 F.3d 1143 (5th Cir. 1997).

8 Fed. R. Civ. P. 56(c).

8

We review a grant of summary judgment de novo.

7

 Summary judgment is

appropriate “if the pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any,show that there is no genuine

issue as to any material fact and that the moving party is entitled to a judgment as

a matter of law.”8

Metro contends that Ford’s CPA program constitutes vertical price fixing in

violation of the Sherman Act. The district court found the lack of evidence of an

agreement fatal to Metro’s Sherman Act claim. Metro contends that the district

court erred in this regard because the existence of a contract or agreement is not

required for a vertical price fixing claim. Metro maintains that Ford’s independent

and unilateral actions are sufficient to support its claim. We do not find these

contentions persuasive.

Section 1 of the Sherman Act expressly requires that there be a “contract,

combination ... or conspiracy” between the manufacturer and other distributors in
9

 15 U.S.C. § 1. Purely unilateral behavior is illegal under § 2 of the Sherman Act,

but only when it threatens actual monopolization. Metro does not allege or offer evidence

of monopolization; instead claiming restraint of trade, which is governed by section 1.

10 Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 760 (1984).

11 Id.

12 See id.; United States v. Colgate & Co., 250 U.S. 300 (1919); Business

Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717 (1988).

Metro contends nevertheless that Ford’s unilateral actions are per se illegal

without evidence of a contract under Dr. Miles Medical Company v. John D. Park

& Sons Company, 220 U.S. 373 (1911). The flaw in Metro’s reasoning is its failure

to recognize the existence, and corresponding significance, of the systems of contracts

involved in that case. The plaintiff, Dr. Miles Medical Company, had devised a system

of contracts with its customers to maintain minimum resale prices at which its

proprietary medicine products would be sold. The defendant, John D. Park & Sons,

was a wholesale drug company which refused to enter into such a contract. The

plaintiff charged that the defendant, “in combination and conspiracy with a number of

wholesale and retail dealers in drugs and proprietary medicines,” procured its

medicines by inducing the violation of the contracts. Id. at 381-82.

The plaintiff’s right to relief depended on the validity of the restrictive contracts,

making it the central issue before the Court. The Court found, however, that the

contracts constituted unlawful resale price maintenance by restricting “the freedom of

trade on the part of dealers who own what they sell.” This finding that resale price

maintenance is per se illegal under § 1 has been reaffirmed by the Court. See United

9

order to establish a violation.9 “Independent action is not proscribed.”10 Even

where a single firm’s restraints directly affect prices and have the same economic

effect as concerted action might have, there can be no liability under § 1 in the

absence of a combination or agreement.11 Thus, the distinction between

independent action and joint action is fundamental in antitrust jurisprudence, and

a claim will not exist in the absence of the latter.12 Accordingly, we find and
States v. Parke, Davis & Co., 362 U.S. 29 (1960); California Retail Liquor Dealers

Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980); Monsanto Co., 465 U.S. 752.

In Business Electronics Corporation, however, the Court made it clear that vertical

price restraints require an agreement or concerted action, and not just an effect on

resale prices, to be per se unlawful. 485 U.S. 717. We thus focus on whether the

restraint is unilateral or concerted for all aspects of a section 1 claim.

13 15 U.S.C. § 13(a).

10

conclude that the district court was correct in determining that the lack of a

“contract, combination ... or conspiracy” precludes Metro’s Sherman Act claim.

Metro also contendsthat Ford’simplementation of the CPA program resulted

in price discrimination in violation of the Robinson-Patman Act. The district court

found that Metro failed to demonstrate that the same level of CPA was not

functionally available to all dealers and, thus, no evidence of price discrimination

exists. Metro insists that summary judgment on this basis was erroneous because

whether or not the discounts were equal, no such defense exists unlessthe discounts

were cost justified or offered in good faith to meet competition. Again, Metro’s

contentions are not persuasive.

Section 2(a) of the Robinson-Patman Act provides that it is unlawful for a

seller “either directly or indirectly, to discriminate in price between different

purchasers of commodities of like grade and quality.”13 For its claim under § 2(a)

of the Robinson-Patman Act to succeed, Metro must adduce evidence of an actual
14 FTC v. Anheuser-Busch, Inc., 363 U.S. 536 (1960).

15 See, e.g., FTC v. Morton Salt, 334 U.S. 37 (1948); Capital Ford Truck Sales,

Inc. v. Ford Motor Co., 819 F.Supp. 1555 (N.D. Ga. 1992).

16 Precision Printing Co. v. Unisource Worldwide, Inc., 993 F.Supp. 338, 350

(W.D. Pa. 1998).

17 See Morton Salt, 334 U.S. 37. While some functional discounts may be covered

by the cost justification defense or the meeting competition defense, these defenses present

no bar to the use of the functional availability theory to demonstrate the lack of an essential

element of the case (price discrimination), as alleged by Metro. See Kintner & Bauer, 3

Federal Antitrust Law, § 25.7, (1983) (“availability” is technically not an affirmative

defense, but the negation of an element of the plaintiff’s case).

11

instance of price discrimination, i.e. a difference in price charged to different

purchasers or customers of the discriminating seller for products of like grade or

quality.14 If the challenged lower price was in fact -- and not merely theoretically --

made available to the allegedly disfavored purchasers, the seller cannot be held

liable under section 2(a).15

This “functional availability” theory “is a judicial graft on § 2(a) and is not

explicitly embodied in the text of the statute.”16 Nevertheless, the theory is clear

and coincides with the purpose of the Act in that a price discount equally available

to all purchasers for the same customer and product is not price discrimination.17

As found by the district court, the record reflects that Metro was treated the same

as all other Ford dealers with respect to CPA for the same customer, and products

of like grade and quality. The record further establishes that the CPA program
17 As an initial matter, we note that Metro contends that this issue was mooted by the

state court’s dismissal of Ford’s RICO claim. Ford challenges this contention, and also

submits that the remand of the state law claims remains at issue. Although we earlier were

advised that the state law claims were scheduled to be tried in state court beginning in April

1998, we have received no additional information. Nevertheless, given our conclusion

herein, infra, we need not resolve this dispute.

12

functioned to ensure that all Ford dealers issuing bids to the same customer

received equal CPA, and that all Ford dealers could meet the competition from

other original equipment manufacturers. Metro concedes that the discounts were

available to it on an equal basis with other Ford dealers. We therefore must find

and conclude that price discrimination did not exist, and that no violation of the

Robinson-Patman Act occurred.

Having found the grant of summary judgment in favor of Ford on Metro’s

federal antitrust claims to be appropriate, we turn to Ford’s cross-appeal wherein

it challenges the remand of its third-party RICO claim and the pendent state law

claims.17 Ford contends that the district court had no legal authority to remand its

RICO claim to state court because the claim arose under federal law and was filed

in federal court. Ford further contends that because the RICO and state law claims

are interrelated, the factors of judicial economy, convenience, fairness, and comity

require that all the claims be tried in the same court, making the remand of the

pendentstate law claimsimproper. We review de novo whether the legal authority
18 Eastus v. Blue Bell Creameries, L.P., 97 F.3d 100 (5th Cir. 1996). The

remand order was based on the district court’s discretionary power under § 1441(c)

and, thus, § 1447(d) does not bar review. Id.

19 28 U.S.C. § 1441.

20 14A Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction 2d §

3722, at 255-60. See Gully v. First Nat’l Bank, 299 U.S. 109 (1936).

21 While a third-party defendant may remove a case to federal court based on the

third-party claim, a defendant/third-party plaintiff may not. See Carl Heck Engineers, Inc.

v. Lafourche Parish Police Jury, 622 F.2d 133 (5th Cir. 1980).

13

to remand existed and, further, review the decision to remand for an abuse of

discretion.18

The essential concept governing in this appeal, perhaps overlooked by Ford,

is that the district court’s jurisdiction was derived from a § 1441 removal.19 When

an action is brought to federal court through the § 1441 mechanism, “for both

removal and original jurisdiction, the federal question must be presented by

plaintiff’s complaint asitstands at the time the petition for removal is filed and the

case seeks entry into the federalsystem. It is insufficient that a federal question has

been raised as a matter of defense or as a counterclaim.”20 Similarly, the

defendant’s third-party claim alleging a federal question does not come within the

purview of § 1441 removability.21 The third-party claim, like a defense or

counterclaim, is a pleading by the defendant. The third-party claim does not

change the character of the plaintiff’s complaint any more than does the
22 Great Nothern Ry. Co. v. Alexander, 246 U.S. 276, 281 (1918) (“It is also settled

that a case, arising under the laws of the United States, nonremovable on the complaint,

when commenced, cannot be converted into a removable one by evidence of the defendant

..., but that such conversion can only be accomplished by the voluntary amendment of his

pleading by the plaintiff....”).

23 Id. at 282 (“the plaintiff may by the allegations of his complaint determine the

status with respect to removability of a case, arising under a law of the United States, when

it is commenced, and [] this power to determine the removability of his case continues with

the plaintiff throughout the litigation, so that whether such a case nonremovable when

commenced shall afterwards become removable depends not upon what the defendant may

allege or prove ..., but solely upon the form which the plaintiff by his voluntary action shall

give to the pleadings in the case as it progresses towards a conclusion.”).

14

defendant’s other pleadings. Thus, the federal question alleged in the defendant’s

third-party claim does not, in and of itself, confer jurisdiction upon the federal

court.

The initiation of Ford’s third-party claim in federal court, as opposed to that

in state court prior to removal, does not change its status. Such a result would be

contrary to the rule that removal jurisdiction must be disclosed on the face of the

plaintiff’s complaint,22 and that the basis to determine removal jurisdiction so

continues throughout the litigation.23 To hold otherwise would unduly grant a

defendant the power to manipulate removal jurisdiction once in federal court,

despite overwhelming authority proscribing same.

Having determined that Ford’sfiling of itsthird-party RICO claim in federal

court after removal does not impact the court’s removal jurisdiction and its
24 Once the claims on which removal jurisdiction was based were dismissed, the

district court rightfully reevaluated its jurisdiction and the position of the action. See

Menchaca v. Chrysler Credit Corp., 613 F.2d 507, 511 (5th Cir. 1980) (“It is axiomatic

that a district court may inquire into the basis of its subject matter jurisdiction atany stage

of the proceedings.”).

25 Eastus, 97 F.3d at 104.

15

corresponding remand authority, we turn to the remand decision.24 After

dismissing the federal antitrust claims, the court determined that state law

predominated over the remaining claims, and that the interests of judicial economy,

convenience, fairness, and comity warranted remand under § 1441(c).

Section 1441(c) provides:

Whenever a separate and independent claim or cause of action within

the jurisdiction conferred by section 1331 of this title is joined with

one or more otherwise non-removable claims or causes of action, the

entire case may be removed and the district court may determine all

issues therein, or, in its discretion, may remand all matters in which

State law predominates.

Thus, for remand to be proper, the claim remanded must be “(1) a separate and

independent claim or cause of action; (2) joined with a federal question; (3)

otherwise non-removable; and (4) a matter in which state law predominates.”25

As an initial matter, we consider Ford’s contention that district courts have

no authority to remand federal claims. Although RICO is a federal cause of action,

state courts have concurrent jurisdiction to adjudicate civil claims arising
26 Tafflin v. Levitt, 493 U.S. 455 (1990).

27 If the federal claim in this case fell within the court’s exclusive jurisdiction, rather

than concurrent, remand of the claim would be improper because the state court would be

unable to hear the federal claim. Accordingly, a federal claim within the court’s exclusive

jurisdiction would not implicate § 1441 removal jurisdiction because the state court would

have no jurisdiction at the outset. See Arizona v. Manypenny, 451 U.S. 232 (1981).

28 Buchner v. FDIC, 981 F.2d 816 (5th Cir. 1993) (plaintiff’s complaint conferred

removal jurisdiction over claim sought to be remanded);In re Wilson Industries, Inc., 886

F.2d 93 (5th Cir. 1989) (same); Burks v. Amerada Hess Corp., 8 F.3d 301 (5th Cir. 1993)

(same); Smith v. Texas Children’s Hosp., 84 F.3d 152 (5th Cir. 1996) (same).

29 Eastus, 97 F.3d 100 (and cases cited therein). See also 14A Wright, Miller &

Cooper, Federal Practice and Procedure: Jurisdiction 2d § 3724 (Supp. 1997) (and cases

cited therein).

16

thereunder.26 Thus, any attempt to equate “original jurisdiction” with “exclusive

jurisdiction” in this instance would be error.27 The cases relied on by Ford are

distinguishable because therein the court sought to remand federal claims which

would have been otherwise removable.28 As discussed supra, Ford’s third-party

RICO claim could not, and did not, confer removal jurisdiction in this instance. In

addition, we have since noted that the new § 1441(c) permits courts to remand an

entire action, or distinct claims, both state and federal, if state law predominates.29

We thus must find no merit in Ford’s contentions.

In the case at bar, the federal antitrust claims constituted the basis of the

court’s removal jurisdiction, and were joined with Ford’s third-party RICO claim.

Because the third-party RICO claim could not provide removal jurisdiction, it
30 We note that Ford misapplies the § 1441(c) analysis by assuming that the RICO

claim forms the basis of jurisdiction and must be considered in relation to the state law

claims. As discussed supra, this is error.

31 American Fire & Casualty Ins. Co. v. Finn, 341 U.S. 6, 14 (1951).

32 Eastus, 97 F.3d at 104.

17

qualifies as an “otherwise non-removable” claim. Thus, only the first and fourth

elements of the § 1441(c) analysis can be disputed.30

The first element requires independence as well as separateness. “[W]here

there is a single wrong to [the] plaintiff, for which relief is sought, arising from an

interlocked series of transactions, there is no separate and independent claim or

cause of action under § 1441(c).”31 “If one claim depends on establishing liability

under the other, the two cannot be found to be independent.”32

We find that, in this case, the federal antitrust claims and the RICO claim are

separate and independent. Metro sought relief from Ford based on its

implementation oftheCPA program, alleging price fixing and discrimination under

the federal antitrust laws. In its third-party RICO action, Ford sought relief from

Foley for alleged fraud and misrepresentation in the operation of the Metro

dealership. Although the CPA program was involved in both the antitrust and

RICO actions, the claims rely on different supporting facts and clearly seek

separate relief for distinct wrongs.
33 See Tafflin, 493 U.S. 455.

34 See 28 U.S.C. § 1367(c); Carnegie-Melon University v. Cohill, 484 U.S. 343

(1988).

18

Ford concedes that the RICO claim and the pendent state law claims are

substantially related, calling for litigation in one forum. In fact, the RICO claim

is so intertwined with the state law claims as to be difficult to treat separately. We

perceive no incompatibility between state court jurisdiction and federal interests33

and, thus, find thatstate law predominates. Accordingly, we find and conclude that

§ 1441(c) authorized remand of the third-party RICO claim, and we affirm that

portion of the order. In light of this conclusion, and considering the interests of

judicial economy, convenience, fairness, and comity, we must conclude that the

district court did not abuse its discretion in correspondingly remanding the pendent

state law claims.34

The judgment appealed is AFFIRMED.