Opinion ID: 3000181
Heading Depth: 2
Heading Rank: 4

Heading: Vertical Conspiracy

Text: Miles also argues that it offered evidence from which a jury could find an illegal vertical conspiracy. The Supreme Court has held that a vertical restraint is not illegal per se unless it includes some agreement on price or price levels. Bus. Elecs., 485 U.S. at 735-36. Although the post-termination sales blitz shows concerted activity between TEC and its distributors, Miles must still demonstrate that the concerted activity involved an agreement on price. Id.; see also Monsanto, 465 U.S. at 762 (recognizing that constant communication between a manufacturer and its distributors about prices and market strategy does not show that the distributors are not making pricing decisions independently). 14 No. 06-1992 Monsanto stands for the proposition that a jury cannot reasonably infer an agreement to fix prices from the fact that a termination came about in response to com- plaints about price. See 465 U.S. at 763. Evidence of price complaints or action in response to such complaints cannot support a conspiracy to fix prices in and of itself because suppliers may legitimately decide to retain their larger customers by terminating a price-cutting competitor. See id. That does not mean, however, that evidence of price complaints has no probative value at all. Id. at 764 n.8. In this case, it is undisputed that the competing distributors, Virginia Tile, Louisville Tile, Sobol Sales, Miller’s Wholesale and American Equipment complained about the prices Miles charged for TEC products. It is also clear that TEC covertly worked hand-in-hand with those distributors to formulate a plan to blitz the market as soon as it terminated Miles. Notably, TEC did not circulate a price list or suggest price margins to its distributors. Nonetheless, Miles asserts that TEC conspired with its other distributors to terminate Miles knowing that doing so would stabilize prices. Miles also emphasizes that TEC asked Miles to raise its prices. Moreover, Miles highlights its competitors’ actions after its termination as evidence that TEC and its distributors made quid pro quo arrangements in exchange for the termination. In contemplating its options, TEC sought assurances from its other distributors that they would work to recover sales lost in the event that Miles ceased distributing TEC products. During this time, Louisville Tile agreed to begin selling TEC product in its Chattanooga store where it had previously sold only a competing brand. Similarly, Virginia Tile agreed to increase the presence of TEC product in Cleveland and, in fact, did so after Miles was terminated. No. 06-1992 15 Furthermore, once Miles was terminated, Virginia Tile represented in an internal memo that the termination resulted from discussions between Virginia Tile and Millers Wholesale and TEC management. The memo further emphasized that the termination was a result of a TEC decision. According to Miles, the memo shows that the termination was not solely a TEC decision, and that Virginia Tile was concerned enough to cover up its role in the decision. As with the horizontal conspiracy, we must ask whether this evidence sufficiently excludes the possibility that TEC and its non-terminated distributors were acting independently. Monsanto, 465 U.S. at 764. There is no question that TEC and its other distributors acted in concert regarding non-price issues like retaining customer accounts and promoting the TEC product, even going so far as to blitz the market upon Miles’s termination. Nonetheless, a reasonable jury could not infer concerted action to fix prices from the fact that TEC and its other distributors acted in concert in other respects. See Monsanto, 465 U.S. at 763 (“[I]t is of considerable importance that . . . concerted action on nonprice restrictions[ ] be distinguished from price-fixing agreements . . . .”). Nor could a jury infer a price fixing agreement from the fact that Miles’s termination pleased its competitors. Clearly, the termination eliminated the downward pressure Miles put on TEC products in the market, but no reasonable jury could infer a price-fixing agreement from the fact that the prices stayed the same before and after Miles was terminated. See Bi-Rite Oil Co. v. Ind. Farm Bureau Coop. Ass’n, 900 F.2d 200, 203 (recognizing that many legitimate factors may lead to a decision to terminate a price-cutter). Despite the paucity of its evidence, Miles argues that its evidentiary burden is lessened by the Supreme Court’s decision in Matsushita. Miles argues that Matsushita 16 No. 06-1992 recognized the existence of a plausible motive to engage in an antitrust violation as a significant factor in determining whether a material issue of fact precludes summary judgment. 475 U.S. at 597. Therefore, Miles contends, because TEC had a plausible motive to conspire with its other distributors to terminate Miles, less evidence is necessary to raise an inference of an illegal agreement than would be necessary if no plausible motive existed. Miles misstates Matsushita, which actually says that: the absence of any plausible motive to engage in the conduct charged is highly relevant to whether a ‘genuine issue for trial’ exists . . . . Lack of motive bears on the range of permissible inferences that might be drawn from ambiguous evidence: if petitioners had no rational economic motive to conspire, and if their conduct is consistent with other, equally plausible explanations, the conduct does not give rise to an inference of conspiracy. Id. (emphasis supplied). The Court added in a footnote that it did not mean to imply that “if petitioners had had a plausible reason to conspire, ambiguous conduct could suffice to create a triable issue of conspiracy,” and noted that Monsanto still controlled the interpretation of ambiguous evidence. Id. at 597 n.21. In other words, a plausible motive for TEC to engage in anticompetitive behavior does not lessen Miles’s evidentiary burden. Finally, Miles cites cases from other circuits to argue that the allegedly pretextual justifications for its termination raise genuine issues of material fact as to whether TEC’s actions were legal. See Alvord-Polk, Inc. v. F. Schumacher & Co., 37 F.3d 996, 1012 (3d Cir. 1994) (recognizing that where facts show that a defendant’s proffered explanation for its actions is, in fact, pretextual, it tends to support an inference of concerted action); Ezzo’s No. 06-1992 17 Invs., Inc. v. Royal Beauty Supply, Inc., 94 F.3d 1032, 1034-35 (6th Cir. 1996) (holding that a reasonable jury could infer a price-fixing conspiracy from a supplier’s pretextual reason for cutting off a beauty product distributor). Even assuming that TEC’s initial reasons were pretextual, all of Miles’s evidence suggests that it was terminated based on price complaints from other TEC distributors rather than an illegal price-fixing agreement. Because the Supreme Court has already said that manufacturers can legitimately terminate distributors based on price complaints, the fact that TEC offered different reasons initially does not change the analysis. Although pretextual reasons have some probative value, we hold that they are insufficient to create a genuine issue of fact without other evidence pointing to a price-fixing agreement. See, e.g., H.L. Hayden Co. of N.Y., Inc. v. Siemens Med. Sys., Inc., 879 F.2d 1005, 1014 (2d Cir. 1989) (stating that mere fact that defendant’s purported reason is undermined does not, by itself, justify the inference that the conduct was the result of a conspiracy). Taking the evidence as a whole, Miles has not shown that a genuine issue of fact exists regarding a price-fixing agreement. C. Interference with Prospective Business Advantage Under Indiana state law, in order to prevail on a tortious interference with prospective business relations claim, a plaintiff must prove: 1) the existence of a business relationship; 2) the defendant’s knowledge of the existence of that relationship; 3) the defendant’s intentional interference with that relationship; 4) the absence of any justification; and 5) damages. Levee v. Beeching, 729 N.E.2d 215, 222 (Ind. Ct. App. 2000). Where there is no contract, “illegal conduct is an essential element of tortious 18 No. 06-1992 interference with a business relationship.” Id. Therefore, Miles’s state tort claim rises or falls with its antitrust claim, which would supply the illegal conduct. Because Miles cannot succeed on its antitrust claims, we affirm the district court’s grant of summary judgment on the state law claim as well.