Source: http://ny.findacase.com/research/wfrmDocViewer.aspx/xq/fac.19790531_0000013.NNY.htm/qx
Timestamp: 2017-05-23 16:44:41
Document Index: 536070066

Matched Legal Cases: ['§ 1', '§ 1', '§ 340', '§ 16', '§ 26', '§ 16', '§ 4', '§ 114', '§ 4', '§ 16', '§ 1', '§ 2']

| OPTIVISION, INC. v. SYRACUSE SHOPPING CTR. ASSOCS.
OPTIVISION, INC. v. SYRACUSE SHOPPING CTR. ASSOCS.
OPTIVISION, INC., Plaintiff,
SYRACUSE SHOPPING CENTER ASSOCIATES, a Limited Partnership, International Business & Realty Corporation, Irving H. Rosenberg, and DeWitt's Optical World, Inc., Defendants
MEMORANDUM DECISION AND ORDER On January 15, 1974, Optivision, Inc., which operates a wholesale and retail optical goods business, entered into a lease agreement with Syracuse Shopping Center Associates ("Syracuse Associates") to rent a small commercial unit within the Northern Lights Shopping Center for use as a retail store for the dispensing of eyeglasses, contact lenses, and other optical devices. The lease was for five years, commencing on March 1, 1974 and ending on February 28, 1979. A rider to the lease gave the tenant the option to extend the term for an additional five-year period at a slightly increased rental, and provided that the tenant must give the landlord notice of his exercise of the option at least six months prior to the expiration date of the original term. The lease required such notice to be delivered in person or sent by certified mail to Syracuse Shopping Center Associates at 17 Court Street, Buffalo, New York. There is disagreement among the parties as to whether Optivision validly exercised this renewal option. On September 6, 1978, the landlord leased a different commercial unit in the Northern Lights Shopping Center to a competitor of Optivision, DeWitt's Optical World, Inc. ("DeWitt"), for use as a retail optical goods store. The lease agreement with DeWitt contains an exclusivity clause, providing that the landlord will not rent space in the shopping center to any other optical store unless the center is expanded to include a third department store. In this action, Optivision challenges the validity of the exclusivity clause in DeWitt's lease under §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, and under the New York State Donnelly Act. New York General Business Law § 340. Optivision also asserts that, under the legal or equitable principles applied by the New York courts, the lease should be regarded as having been properly renewed, and further alleges that defendants have tortiously interfered with plaintiff's contractual relations. Optivision seeks declaratory and injunctive relief as well as damages. Presently before the Court is Optivision's motion for a preliminary injunction to restrain defendants from taking any action to enforce the exclusivity clause contained in the lease between the landlord and DeWitt and to restrain defendants from taking any action to remove plaintiff from its present Northern Lights location, pending a determination on the merits of this lawsuit. An evidentiary hearing was held before the Court on March 27 and 28, 1979. At that time, four witnesses testified: John Ransom, Chairman of the Board of Optivision; John Carter, New York State Regional Manager for Optivision; Irving Rosenberg, President of International Business & Realty Corporation ("International") and the leasing and managing agent for Northern Lights; and Morris DeWitt, President and principal shareholder of DeWitt's Optical World, Inc. Certain documentary proof was received in evidence during the hearing. It is well established in this circuit that a party seeking a preliminary injunction must make a clear showing of either (1) probable success on the merits And possible irreparable injury, Or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation And a balance of hardships tipping decidedly toward the party requesting the preliminary relief. Selchow & Righter Co. v. McGraw-Hill Book Co., 580 F.2d 25, 27 (2d Cir. 1978); State of New York v. Nuclear Regulatory Commission, 550 F.2d 745, 750 (2d Cir. 1977); Jacobson & Co. v. Armstrong Cork Co., 548 F.2d 438, 441 n. 2 (2d Cir. 1977); Sonesta International Hotels Corp. v. Wellington Associates, 483 F.2d 247, 250 (2d Cir. 1973). I. A. Initially, defendants argue that plaintiff does not have standing to maintain the antitrust claims since there is not a sufficient causal relationship between the harm to Optivision and defendants' alleged anticompetitive conduct. Defendants argue that the damage suffered by Optivision is a direct and proximate result of its own ineptitude in failing to properly exercise the renewal option in its lease rather than the result of any combination or conspiracy among the defendants. The right of a private litigant to injunctive relief in an antitrust action is governed by § 16 of the Clayton Act, 15 U.S.C. § 26,
which states in pertinent part: Any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief, in any court of the United States having jurisdiction over the parties, against threatened loss or damage by a violation of the antitrust laws . . . when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity, under the rules governing such proceedings . . . See also Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 130, 89 S. Ct. 1562, 23 L. Ed. 2d 129 (1969); SCM Corp. v. Xerox Corp., 507 F.2d 358, 360 (2d Cir. 1974). The standing requirement of § 16 is less restrictive than that contained in § 4 since the right to sue under the former provision extends to threatened as well as actual injuries, and is not limited to injuries to a party's "business or property." Hawaii v. Standard Oil Co., 405 U.S. 251, 260-62, 92 S. Ct. 885, 31 L. Ed. 2d 184 (1972); DeGregorio v. Segal, 443 F. Supp. 1257, 1265 n. 13 (E.D.Pa.1978); 15 J. Von Kalinowski, Antitrust Laws and Trade Regulation § 114.01(1) (1978). However, as in a suit for treble damages under § 4, a party seeking injunctive relief under § 16 must demonstrate that the injury he has suffered (or is threatened with) proximately results from the antitrust violation. Credit Bureau Reports, Inc. v. Retail Credit Co., 476 F.2d 989, 992 (5th Cir. 1973); Burkhead v. Phillips Petroleum Co., 308 F. Supp. 120, 123 (N.D.Cal.1970). Thus, "(t)here must be a causal connection between an antitrust violation and an injury sufficient for the trier of fact to establish that the violation was a "material cause' of or a "substantial factor' in the occurrence of damage." Bowen v. New York News, Inc., 522 F.2d 1242, 1255 (2d Cir. 1975), Cert. denied, 425 U.S. 936, 96 S. Ct. 1667, 48 L. Ed. 2d 177 (1976); Billy Baxter, Inc. v. Coca-Cola Co., 431 F.2d 183, 187 (2d Cir. 1970), Cert. denied, 401 U.S. 923, 91 S. Ct. 877, 27 L. Ed. 2d 826 (1971). On the basis of the present record in this case, the Court concludes that there is a sufficient causal relationship between the harm plaintiff is threatened with and the alleged anticompetitive conduct. While Optivision may not have validly exercised its renewal option, there is a substantial possibility that it would have been able to enter into a new lease agreement with the landlord at an increased rental if the exclusivity clause had not been granted to DeWitt. The nexus between the threatened harm and the activity in question can be seen from the letter sent by the landlord's counsel to the attorney for Optivision in which it is stated that Syracuse Associates have made "lease commitments which preclude their further interest in . . . (Optivision's) staying at Northern Lights." Defendants correctly point out that if Optivision has not properly renewed its lease, it will be in the same position with respect to the enforcement of the exclusivity clause as any other optical goods store in the Syracuse area, but the Court feels that such a party does have standing to seek injunctive relief, provided that there is space available in the shopping center which the landlord refuses to rent because of the exclusivity clause. See Pay Less Drug Stores Northwest, Inc. v. City Products Corp., 1975-2 Trade Cases P 60,385 (D.Ore.1975).
Thus, plaintiff has shown a probability of successfully demonstrating that it has standing to maintain this suit. B. Defendants also contend that the federal antitrust claims must be rejected, because plaintiff has failed to satisfy the interstate commerce requirement of the Sherman Act. That Act prohibits every contract, combination, or conspiracy "in restraint of trade or commerce among the several States," 15 U.S.C. § 1, and also outlaws any monopolization of, attempt to monopolize, or combination or conspiracy to monopolize a "part of the trade or commerce among the several States." 15 U.S.C. § 2. The interstate commerce requirement of the Sherman Act will be established if the plaintiff is able to demonstrate either that the alleged anticompetitive conduct occurred in the flow of interstate commerce or that the activity in question, although occurring on a local or state level, has a substantial effect upon interstate commerce. Burke v. Ford, 389 U.S. 320, 321, 88 S. Ct. 443, 19 L. Ed. 2d 554 (1967); Tiger Trash v. Browning-Ferris Industries, Inc., 560 F.2d 818, 825 (7th Cir. 1977), Cert. denied, 434 U.S. 1034, 98 S. Ct. 768, 54 L. Ed. 2d 782 (1978); Taxi Weekly, Inc. v. Metropolitan Taxicab Board of Trade, Inc., 539 F.2d 907, 909 (2d Cir. 1976); United States v. Greater Syracuse Board of Realtors, Inc., 449 F. Supp. 887, 891 (N.D.N.Y.1978). The source of the restraint may be intrastate, as the making of a contract or combination usually is; the application of the restraint may be intrastate, as it often is; but neither matters if the necessary effect is to stifle or restrain commerce among the states. If it is interstate commerce that feels the pinch, it does not matter how local the operation which applies the squeeze. United States v. Women's Sportswear Manufacturers Association, 336 U.S. 460, 464, 69 S. Ct. 714, 716, 93 L. Ed. 805 (1949). The substantiality of the effect under the affecting commerce theory must be viewed in terms of practical economics. Goldfarb v. Virginia State Bar, 421 U.S. 773, 784 n. 11, 95 S. Ct. 2004, 44 L. Ed. 2d 572 (1975); Doctors, Inc. v. Blue Cross of Greater Philadelphia, 490 F.2d 48, 51 (3d Cir. 1973); Rasmussen v. American Dairy Association, 472 F.2d 517, 523 (9th Cir. 1972), Cert. denied, 412 U.S. 950, 93 S. Ct. 3014, 37 L. Ed. 2d 1003 (1973). In making this determination, the court must consider whether there is a sufficient nexus between the complained of conduct and the interstate commerce involved and whether the volume or amount of commerce so affected is substantial. Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 96 S. Ct. 1848, 48 L. Ed. 2d 338 (1976); Harold Friedman Inc. v. Thorofare Markets Inc., 587 F.2d 127, 132 (3d Cir. 1978); United States v. Greater Syracuse Board of Realtors, Inc., supra, 449 F. Supp. at 891, 897; Joe Westbrook, Inc. v. Chrysler Corp., 419 F. Supp. 824, 837 (N.D.Ga.1976). Testimony concerning the contacts between Optivision's Northern Lights store and interstate commerce was received at the hearing held in this case. In the Court's opinion, the most significant of those contacts is the purchase of products from out-of-state suppliers for resale in the Northern Lights retail outlet. Both Mr. Ransom and Mr. Carter listed several Optivision suppliers which were located in other states, but the record does not contain the precise figure representing the volume of products sent from outside the state to the Northern Lights store. Mr. Ransom stated that the projected gross retail sales for the Northern Lights store for the year 1979 is $ 200,000, and said that approximately 40% Of the gross retail sales figure is represented by the wholesale cost of the products delivered to that store for resale (which would make the wholesale cost in 1979 $ 80,000). It is unclear exactly what portion of the $ 80,000 wholesale cost reflects the purchase of goods from out-of-state suppliers, but it is reasonable to infer from the testimony that a significant portion of the $ 80,000 figure represents the purchase of out-of-state products since Mr. Ransom stated that Optivision's largest supplier of optical lenses, from which it purchases the great bulk of its lenses, is located in Philadelphia, Pennsylvania, and lenses constitute one of the two principal items bought from wholesalers (the other principal item being frames).
The Optivision representatives also testified that, while the vast majority of customers going to the Northern Lights store were from the Greater Syracuse Metropolitan Area, a small percentage (perhaps 1 or 2% According to Mr. Carter) came from other states.
In this regard, it was noted that customers of other Optivision stores are given guarantees that will be honored at the Northern Lights retail outlet, and that the Northern Lights Shopping Center is located near several interstate highways. There was also testimony that materials are sometimes transferred between the Northern Lights store and Optivision stores located outside New York State. Optivision has six stores in Georgia in addition to twelve in New York State. Optivision is also affiliated, under a concept known as Vision World, with stores located in Maryland and the Washington, D.C. area. The stores associated with Vision World engage in joint purchasing and promotional programs. The alleged anticompetitive conduct here the enforcement of the exclusivity clause in DeWitt's lease will result in a cessation of the interstate movement of supplies and customers to the Northern Lights store operated by Optivision. This will cause a reduction in the total amount of commerce moving between the states or, at least, will cause the diversion of such commerce from Optivision's Northern Lights store to DeWitt's store situated in that shopping center or to retail optical outlets located elsewhere. In either event, there would be the required nexus between the acts in question and the interstate commerce involved. See Harold Friedman Inc. v. Thorofare Markets Inc., supra, 587 F.2d at 132; Hudson Valley Asbestos Corp. v. Tougher Heating & Plumbing Co., 510 F.2d 1140, 1142-43 n. 1 (2d Cir.), Cert. denied, 421 U.S. 1011, 95 S. Ct. 2416, 44 L. Ed. 2d 679 (1975).
&nbsp;While it is not clear from the present record what the exact amount of interstate commerce implicated here is, it appears that a substantial portion of the $ 80,000 worth of supplies purchased annually by the Northern Lights store comes from companies situated in other states. This factor, either alone, or in combination with the sale of goods to out-of-state customers, the transfer of materials between stores in different states, and other factors that may be demonstrated at a trial on the merits,
may quite possibly be sufficient to show that interstate commerce has been substantially affected. In Feminist Women's Health Center, Inc. v. Mohammad, 586 F.2d 530, 539-41 (5th Cir. 1978), the Fifth Circuit found that there was a substantial effect upon interstate commerce so as to establish Sherman Act jurisdiction where the principal connections with interstate commerce were the plaintiff's purchases of $ 4,000 or $ 5,000 worth of out-of-state supplies a year, and the plaintiff's receipt of $ 12,000 worth of business a year from out-of-state patients.
Also, in a civil rights case Katzenbach v. McClung, 379 U.S. 294, 85 S. Ct. 377, 13 L. Ed. 2d 290 (1964) the Supreme Court found a sufficient effect upon commerce so as to bring a restaurant within the purview of Congressional supervision under the Commerce Clause, where the restaurant purchased $ 70,000 worth of meat from a local supplier who had procured it from outside the state. The latter case, while not decided under the Sherman Act, is relevant here, because it has repeatedly been held that, in passing the Sherman Act, Congress ...