Opinion ID: 531048
Heading Depth: 2
Heading Rank: 2

Heading: DeLong's Allegations of a Vertical Price Conspiracy

Text: 31 In order to survive the defendants' motion for summary judgment, DeLong must adduce facts that tend to show a conspiracy to set prices and that DeLong was terminated pursuant to that conspiracy. 13 Antitrust law, however, limits the range of permissible inferences from ambiguous evidence in a case under section 1 of the Sherman Act. Palmer v. BRG of Georgia, Inc., 874 F.2d 1417, 1422 (11th Cir.1989). In Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984), the Court set forth the standard by which to judge the sufficiency of the evidence of an agreement to restrain trade in a dealer termination case: 32 [T]here must be evidence that tends to exclude the possibility of independent action by the manufacturer and distributor. That is, there must be direct or circumstantial evidence that reasonably tends to prove that the manufacturer and others had a conscious commitment to a common scheme designed to achieve an unlawful objective. 33 465 U.S. at 768, 104 S.Ct. at 1473. In Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), the Court held that a non-moving party who seeks to defeat a summary judgment motion must show that the inference of conspiracy is reasonable in light of the competing inferences of independent action or collusive action that could not have harmed the non-moving party. 475 U.S. at 588, 106 S.Ct. at 1356-57. The summary judgment standard in vertical restraint cases is more stringent than in other areas of antitrust law because a higher possibility of capturing and invalidating legitimate business conduct exists. In Helicopter Support Systems, Inc. v. Hughes Helicopter, Inc., 818 F.2d 1530 (11th Cir.1987), this court combined the Monsanto and Matsushita rules into a two-part test applicable to distributor termination cases where the plaintiff alleges that it was terminated due to a collusive price-fixing agreement between a manufacturer and its distributors: 34 First, the plaintiff must satisfy the court that the conspiracy which he alleges is, objectively, an economically reasonable one. Matsushita dictates that if the alleged conspiracy is economically infeasible or irrational then, as a matter of law, summary judgment must be entered against the plaintiff. Second, the plaintiff in a distributor-termination case must also be able to point to evidence which tends to exclude the possibility that the manufacturer was operating independently in making his determination to terminate the distributor. Mere complaints from other competing distributors are not sufficient in this regard since they are equally consistent with both an independent and a collusive interpretation. The distributor must, instead, adduce positive evidence which tends to exclude the possibility of unilateral action. 35 818 F.2d at 1534 (footnote omitted). 36 We need not pause long at the first Helicopter requirement--the conspiracy DeLong alleges is eminently reasonable. BCS, Washington Mills, and DeLong (if it participated) all stood to gain economically by this arrangement. If DeLong's version of events is true, BCS in fact received its portion of the benefits of the scheme in the form of payments to its offshore affiliate, Wood & Thompson, which we discuss below. Termination of a distributor, DeLong, who refused to participate in the scheme is also economically reasonable. This case does not involve economically questionable behavior such as the predatory pricing scheme at issue in Matsushita. See Winn v. Edna Hibel Corp., 858 F.2d 1517, 1520 (11th Cir.1988). 37 In order to satisfy the second prong of the Helicopter inquiry, DeLong must show evidence of concerted action. This evidence need not be such that only an inference of conspiracy may be derived from it. It must, however, go beyond equivocal complaints and tend to exclude the inference of independent action. Helicopter, 818 F.2d at 1534 n. 4 (emphasis in original). We must determine whether a reasonable trier of fact might conclude from the evidence presently before us that Washington Mills and BCS engaged in an illegal conspiracy in restraint of trade. See Helicopter, 818 F.2d at 1535 n. 5. We believe that DeLong has satisfied its burden. We now turn to specific evidence adduced by DeLong that tends to show (1) that Washington Mills and BCS conspired to add a premium to the price of special media going to Pratt, although that media was identical to stock media; and (2) that DeLong's distribution arrangement with Washington Mills was terminated in furtherance of that conspiracy.
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39 DeLong's allegations of a vertical price conspiracy center on the sale of media to Pratt. DeLong argues that BCS and Washington Mills conspired and combined to inflate the price of Washington Mills's standard media by labeling it special and charging Pratt a significantly higher price than Washington Mills's list price for identical media. The Washington Mills media sold to Pratt was designated as special, and was assigned numbers indicating its intended use. DeLong adduced evidence that this special media was actually generic media; i.e., media that Washington Mills regularly produced and carried in stock, and that special media did not differ in size, shape, or composition from the media regularly stocked by Washington Mills. The increased price charged by Washington Mills for this product, DeLong asserted, was not justified by any cost differential. 40 The defendants now admit that the special media is not inherently different from Washington Mills's stock media. The media manufactured by Washington Mills for Pratt was special media known as P & W 5000, P & W 6000, and P & W 7000. 14 The defendants claim that these products were not listed on the price list nor carried in Washington Mills's regular inventory and that Washington Mills exercised a higher degree of quality and inventory control over the media sold to Pratt. However, two of these products, P & W 6000 and P & W 7000, are identified as stock media on Washington Mills's June 1983 and April 1982 price lists. 41 The stock items were sold to distributors at sixty-six cents per pound, less the twenty-five percent discount. Except for a few instances, the details of which are in dispute, Washington Mills quoted DeLong a wholesale price of eighty-five cents per pound for each of the Pratt items. 15 P & W 5000 is not listed on a stock Washington Mills price list, but Washington Mills records suggest that this item was carried in inventory at all times and sold to customers other than Pratt. Moreover, Washington Mills has sold all three types of Pratt media to other customers, and a BCS employee has stated that the only difference between such media sold to Pratt and to other customers is the labeling, i.e., the PMC number stamped on the Pratt boxes. (Robert Biebel Dep. 121-28). DeLong also points to at least two instances where Washington Mills shipped media directly to Pratt in boxes which only carried the PMC number required by Pratt, and did not identify the manufacturer of the media as Washington Mills. 42 DeLong has made a strong showing that the so-called special media (sold at a high price of eighty-five cents per pound) was identical to media carried in Washington Mills's regular inventory and sold to other customers at lower prices. There is at least a genuine issue of fact as to whether the special media is identical to the lower priced stock media. 43
44 In early October 1984, Hans van der Sande and Robert Baldauf of Washington Mills met with Robert Biebel of BCS in Atlanta to discuss the PW situation in Columbus, and visited Pratt's Columbus plant. (Pl.Ex. 200). At this point, BCS was no longer selling media to the Columbus plant. During that meeting, however, the fact that BCS was willing to turn the Pratt Columbus account over to Washington Mills for direct sales was discussed. Van der Sande's report of that meeting stated that Biebel said he has several good friends at P & W, who take trips on his boat to the Bahamas and give him an edge over competition. (Pl.Ex. 191). The record indicates that BCS did provide Caribbean trips on its corporate boat for certain Pratt employees, including James Neil, Moe Dahill, and Dave Dawson, all of whom were responsible, to varying degrees, for testing and approving media. 16 45 There was also evidence that BCS worked with its contacts at Pratt to develop the Washington Mills media used at the Columbus plant. Although the extent of their collaboration remains disputed, it was undisputed that Washington Mills and BCS coordinated their activities in developing the media for Pratt. 17 46 Regarding the October 1984 trip to the Columbus plant, van der Sande's report stated that [w]e had a great visit, inside sources confirmed to Bob [Biebel] that the Pratt people were impressed by our visit. We were given (special permission) to visit the actual manufacturing facilities. (Pl.Ex. 192, van der Sande Dep. 39). The report also stated: his [Biebel's] friend Jim at the Columbus plant makes sure which media does or does not work. (Pl.Ex. 191). 47 The foregoing evidence supports DeLong's allegations of joint action between Washington Mills and BCS in regard to media sales to Pratt. The evidence suggests that BCS had contacts at Pratt which could provide an incentive for Washington Mills to coordinate with BCS in its dealings on the Pratt account, and that the two companies did in fact act jointly with respect to the Pratt account. 48 On the day following the October 1984 trip to the Columbus plant with BCS officials, van der Sande made a routine sales call on DeLong, who was actually servicing the Pratt account at the time. Van der Sande did not mention his visit the day before to the Columbus plant. In van der Sande's report of that meeting dated October 10, 1984, he stated that DeLong was not very happy with BCS, and P & W.... Harold does not play with a full deck either.... He is not all wrong about the B.C.S. situation, long term it may not work. Bob Bieble [sic] feels we are secure for at least 3 years unless Delong [sic] does not play the game. (Pl.Ex. 194). 49 The evidence that Washington Mills and BCS had worked together in developing the Pratt media; that the Pratt media was priced at a premium though it was in fact identical to generic media; that BCS's contacts at Pratt provided an incentive for joint action; that Washington Mills and BCS were continuing to work together on the Pratt account during the October, 1984 plant visit, long after DeLong had replaced BCS as the Pratt distributor; and that Washington Mills and BCS were conversing in October, 1984 about the good prospects for continuing the Pratt arrangement unless DeLong refused to play the game--all support DeLong's assertion that Washington Mills and BCS had agreed to pad the price of the Pratt media. 50
51 DeLong presents additional, and more compelling, evidence of joint action between Washington Mills and BCS. Washington Mills paid Wood & Thompson, a Bahamian corporation which owned most of BCS's stock at the time, funds which were tied to sales of media to Pratt. 18 The payment of these funds, which amounted to approximately $50,000, is not in dispute. The payments were based on 15% of the wholesale selling price of media to Pratt and lasted for approximately two years after BCS ceased servicing the Columbus plant. 52 The defendants claim that this money was compensation for technical work done by BCS and for BCS's work in getting Washington Mills's product approved by Pratt, even though BCS no longer sold media to the Columbus plant. Such an override was not customary; in fact the evidence shows that Washington Mills had never paid such a commission to any other distributor. Defendants claim that the Pratt situation was so complex that additional compensation to BCS was justified. 53 DeLong claims that these commissions actually represented BCS's share of the inflated price Pratt paid for media. To support its argument, DeLong points to testimony by James Neil, a supervisor in the engineering group at Pratt who was instrumental in issuing the PMCs for the media at issue in this case. Neil worked closely with BCS from 1981 through 1983, and considered Robert Biebel to be a friend of his. Neil testified that he worked with Robert Biebel on testing of media, and that Biebel was compensated for this testing at the time it was performed. Biebel and BCS were compensated for testing directly, not through later sales of media to Pratt. Robert Biebel testified, however, that BCS was not paid for its 1979-83 testing and development of media for Pratt. 54 This testimony, along with other evidence in the record, demonstrates that genuine issues of material fact exist as to the precise nature of the payments from Washington Mills to BCS. Defendants call it compensation for their work on developing the Pratt account, while DeLong claims that it is merely Washington Mills passing on to BCS the benefits of the inflated price, because BCS was integral in setting up the scheme. A jury reasonably could infer that Washington Mills desired to enter into an agreement with BCS to exploit BCS's contacts with key Pratt people, and agreed to pay the commissions to BCS's offshore sister corporation, Wood & Thompson. A jury also could conclude that the Wood & Thompson commissions demonstrate that Washington Mills and BCS agreed on the pad to the price. The amount of the commissions was linked to the sale price of media to Pratt, and there is a reasonable inference that the commissions were a means for BCS to share in the pad by which the price was inflated. 55 Viewing the totality of this evidence in the light most favorable to DeLong, which we must, United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962), a jury reasonably could conclude that Washington Mills and BCS worked together to develop special media for sale to Pratt and agreed to sell it at an inflated price. The meeting between BCS and Washington Mills officials in Atlanta, the trip to Pratt's Columbus plant, gratuities from BCS to key Pratt people, and the commissions paid by Washington Mills based on a percentage of the price of media sold to Pratt-all reasonably tend to support DeLong's conspiracy allegation. 56