Court Opinion

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Opinions of the United
1994 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

5-13-1994

Pastore, et al v. The Bell Telephone Company
Precedential or Non-Precedential:

Docket 93-3556

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      UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

                         ________________

                            NO. 93-3556
                          _______________

                GARY L. PASTORE, an individual;
             NATIONAL SECURITY SYSTEMS CORPORATION,
                   a Pennsylvania corporation,

                                        Appellants

                                v.

          THE BELL TELEPHONE COMPANY OF PENNSYLVANIA,
     a Pennsylvania corporation; BELL ATLANTIC CORPORATION,
           a Delaware corporation; RONALD DONALDSON,
          ROBERT S. FADZEN, JR.; RAYMOND J. WICKLINE;
                        GEORGE CALDWELL
                        _______________

         On Appeal from the United States District Court
            for the Western District of Pennsylvania
                    (D.C. Civil No. 92-00923)
                         _______________

           Submitted Under Third Circuit LAR 34.1(a)
                          May 2, 1994

          Before:   SLOVITER, Chief Judge, HUTCHINSON,
                    and SEITZ, Circuit Judges

                       (Filed: May 16, 1994)
                          _______________

John R. Orie, Jr.
Orie & Zivic
Pittsburgh, PA 15219

          Attorney for Appellants

Richard B. Tucker, III
Jeffrey J. Leech
Diane Hernon Chavis
Tucker Arensberg, P.C.
Pittsburgh, PA 15222

          Attorney for Appellees
          Bell Telephone Co. of Pennsylvania;

                                 1
          Bell Atlantic Corp.; Ronald Donaldson;
          Raymond J. Wickline; George Caldwell
Ralston S. Jackson
Odermatt & Jackson
Pittsburgh, PA 15219

           Attorney for Appellee
           Robert S. Fadzen, Jr.

                         OPINION OF THE COURT

SLOVITER, Chief Judge.

           Gary Pastore and National Security Systems Corporation

(NASSCO), plaintiffs-appellants, appeal from the entry of summary

judgment in favor of defendants-appellees Bell Atlantic

Corporation, its subsidiary, Bell Telephone Company of

Pennsylvania, and four individual employees on plaintiffs'

attempted monopolization claim under section 2 of the Sherman

Act, 15 U.S.C. § 2 (Supp. IV 1992).

                                   I.
                   FACTS AND PROCEDURAL HISTORY

           The facts in this case are, for the most part, not in
dispute.   Pastore established NASSCO in early 1986 to install a

sophisticated custom-designed access control communications

security network (CDACCSN) for Bell of Pennsylvania, which

awarded it a contract for thirty of its facilities.   Bell of

Pennsylvania told Pastore that it planned to order the same

system for all of its 800 facilities if this pilot project was

successful and that it might extend to as many as 4,000

facilities in other subsidiaries of Bell Atlantic.

                                   2
          The pilot project was timely completed and Bell of

Pennsylvania officials expressed satisfaction with NASSCO's

performance.   Thereafter, they repeatedly asked NASSCO to

surrender the computer source codes and specific proprietary

information and technical designs relating to the CDACCSN which

NASSCO declined to do, but because Bell of Pennsylvania insisted

on some guarantees in the event of NASSCO's bankruptcy, NASSCO

agreed to deposit in escrow the requested proprietary

information.

          Nonetheless, Bell of Pennsylvania ceased doing business

with NASSCO and told NASSCO in March 1990 that a project for a

Pittsburgh facility had been placed "on hold."   In December 1990,

Pastore was informed that a security system had been installed by

an entity entitled Integrated Access Systems in the Monroeville

Revenue Accounting Center, although the site was within the

network of facilities to be installed and serviced exclusively by

NASSCO.   Other already-approved projects which were part of the

first planned phase involving installation of the CDACCSN

statewide were not carried forward, while none of the work

planned for the second or third phase was initiated.

          Plaintiffs filed this action in the District Court for

the Western District of Pennsylvania alleging that defendants

attempted to monopolize the relevant market in violation of

section 2 of the Sherman Act1, as well as under a variety of

1
Section 2 provides:

          Every person who shall monopolize, or attempt to
          monopolize, or combine or conspire with any other

                                3
pendent state law tort and contract theories.2    Defendants moved

to dismiss for failure to state a claim under the Sherman Act.

The district court issued an order converting the motion to

dismiss into a motion for summary judgment as to the Sherman Act

claim only.   After granting plaintiffs two extensions for further

discovery, the court granted the summary judgment motion, holding

that the plaintiffs had produced no evidence of a dangerous

probability of the defendants monopolizing the relevant market,

and dismissed the pendent state law claims without prejudice.

Plaintiffs filed this timely appeal.

                                II.
                            DISCUSSION

                                A.
                       Additional Discovery

          Throughout their brief, plaintiffs argue that summary

judgment was inappropriate because they did not have adequate

time for discovery.   As this court has previously noted, we

review a claim that the district court has prematurely granted
summary judgment for abuse of discretion.     See Radich v. Goode,

886 F.2d 1391, 1393 (3d Cir. 1989).    If a party believes that

          person or persons, to monopolize any part of the trade
          or commerce among the several States, or with foreign
          nations, shall be deemed guilty of a felony . . . .

15 U.S.C. § 2.
2
 The twelve count complaint included claims for defamation,
promissory estoppel, anticipatory breach of contract, breach of
contract, breach of duty of good faith, common law fraud and
deceit, tortious interference with contractual and business
relations, tortious bad faith and unfair dealing, interference
with prospective economic advantage, and intentional infliction
of emotional distress.

                                4
s/he needs additional time for discovery, Fed. R. Civ. P. 56(f)

specifies the procedure to be followed,3 and explicitly provides

that the party must file an affidavit setting forth why the time

is needed.    Plaintiffs concede, however, that they did not submit

an affidavit.    This concession is usually fatal, because by not

filing "a Rule 56(f) affidavit, [they have] not preserved [their]

objection to [their] alleged inability to obtain necessary

discovery."     Falcone v. Columbia Pictures Indus., Inc., 805 F.2d
115, 117 n.2 (3d Cir. 1986).

             Plaintiffs contend that their brief opposing the

defendants' motion for summary judgment constructively meets Rule

56(f)'s affidavit requirement.     In the past we have rejected such

arguments because "Rule 56(f) clearly requires that an affidavit

be filed.     'The purpose of the affidavit is to ensure that the

nonmoving party is invoking the protection of Rule 56(f) in good

faith and to afford the trial court the showing necessary to

assess the merit of a party's opposition.'     An unsworn memorandum

3
Federal Rule of Civil Procedure 56(f) provides:

             Should it appear from the affidavits of a party
             opposing the motion [for summary judgment] that the
             party cannot for reasons stated present by affidavit
             facts essential to justify the party's opposition, the
             court may refuse the application for judgment or may
             order a continuance to permit affidavits to be obtained
             or depositions to be taken or discovery to be had or
             may make such other order as is just.

(emphasis added).

                                  5
opposing a party's motion for summary judgment is not an

affidavit."   Radich, 886 F.2d at 1394 (citations omitted).4

          Even if we were to regard the request in plaintiffs'

brief opposing the defendants' motion for summary judgment that

the court "belay [summary judgment] until a more complete factual

record is developed," Plaintiff's Supplemental Memorandum of Law

in Opposition to Motion for Summary Judgment, Docket No. 33 at

13, as the functional equivalent of a Rule 56(f) affidavit, see

St. Surin v. Virgin Island Daily News, Inc., No. 93-7553, 1994 WL
131201 at *3 (3d Cir. Apr. 15, 1994), the district court did not

err in considering defendants' motion for summary judgment

because plaintiffs did not specify "what particular information

is sought; how, if uncovered, it would preclude summary judgment;

and why it has not previously been obtained."     Dowling v. City of

Philadelphia, 855 F.2d 136, 140 (3d Cir. 1988).

          Plaintiffs stated in their brief in the district court

that a deposition of defendant Fadzen would demonstrate specific

intent to monopolize.   They claimed that Fadzen "may be a source

of information not only as to specific intent but as to the

product and the market as well, given his involvement with

vendors and knowledge of software."   Docket No. 33 at 12 n.11.

Even assuming that plaintiffs were referring to the defendants'

4
 Plaintiffs claim that the circumstances in this case are
"somewhat similar" to Miller v. Beneficial Management Corp., 977
F.2d 834, 846 (3d Cir. 1992), where we held that the plaintiff's
reliance on a Magistrate Judge's order waiving the Rule 56(f)
affidavit requirement permitted this court to review the district
court's termination of discovery, but we see no similarity (and
plaintiffs have not articulated any) other than the fact that in
neither case was an affidavit properly filed.

                                 6
market power, the issue relevant here, it would be insufficient

under Rule 56(f).    Such an amorphous allegation fails to explain

what plaintiffs expected to discover, how it applied to their

case and why they could not obtain that information elsewhere.

          The district court granted summary judgment in this

case because the defendants had not entered the relevant market

and thus had no market power.     Plaintiffs have not explained on

appeal why information as to any entry by Bell of Pennsylvania

was available only through Fadzen nor what other attempts

plaintiffs made to discover this information.     It is not readily

apparent, for example, why Pastore himself was unable to submit

an affidavit with such information.     We therefore decline to

reverse the district court's decision to consider the summary

judgment motion, when plaintiffs failed to move beyond mere

generalities in their attempt to delay that consideration.

                                  B.
                    Standards for Summary Judgment

          We review the districts court's decision to enter
summary judgment de novo, applying the same standard as the

district court.     Once the moving party has carried the initial

burden of showing that no genuine issue of material fact exists,

see Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986), the
nonmoving party cannot rely upon conclusory allegations in its

pleadings or in memoranda and briefs to establish a genuine issue

of material fact.     Instead, it "must make a showing sufficient to

establish the existence of every element essential to his case,

based on the affidavits or by the depositions and admissions on

                                  7
file."   Harter v. GAF Corp., 967 F.2d 846, 852 (3d Cir. 1992). It

is true, however, that "[i]nferences should be drawn in the light

most favorable to the non-moving party, and where the non-moving

party's evidence contradicts the movant's, then the non-movant's

must be taken as true."   Big Apple BMW, Inc. v. BMW of North

America, Inc., 974 F.2d 1358, 1363 (3d Cir. 1992), cert. denied,

113 S. Ct. 1262 (1993).

          Although we have stated in the past that summary

judgment should be used sparingly in antitrust litigation because

of the fact-intensive nature of such claims, see Harold Friedman,

Inc. v. Kroger Co., 581 F.2d 1068, 1080 (3d Cir. 1978), more

recently we have taken note that "many courts, including the

Supreme Court, have . . . held defendants entitled to summary

judgment in antitrust cases,"   and that despite the "factually

intensive" nature of antitrust cases "the standard of Fed. R.

Civ. P. 56 remains the same."   Town Sound & Custom Tops, Inc. v.

Chrysler Motors Corp., 959 F.2d 468, 481 (3d Cir.) (in banc)

(citations omitted), cert. denied, 113 S. Ct. 196 (1992).    In

fact, the Supreme Court has recently affirmed that there is no

"special burden . . . [for] summary judgment in antitrust cases."

Eastman Kodak Co. v. Image Technical Servs., Inc., 112 S. Ct.
2072, 2083 (1992).

                                C.
         Dangerous Probability of Achieving Monopoly Power

          The Supreme Court has recently restated the necessary

elements to state a claim under section 2 of the Sherman Act.

"[T]o demonstrate attempted monopolization a plaintiff must prove

                                8
(1) that the defendant has engaged in predatory or

anticompetitive conduct with (2) a specific intent to monopolize

and (3) a dangerous probability of achieving monopoly power."

Spectrum Sports, Inc. v. McQuillan, 113 S. Ct. 884, 890-91 (1993)

(citing 3 Phillip Areeda & Donald F. Turner, Antitrust Law ¶ 820

at 312 (1978)).

          The district court granted summary judgment based on

the failure of the plaintiffs to meet the "dangerous probability"

requirement, and this is the only issue before us on appeal.

Determining whether a "dangerous probability" exists requires

"inquiry into the relevant product and geographic market and the

defendant's economic power in that market."    Spectrum Sports, 113
S. Ct. at 892.

          The plaintiffs have the burden of defining the market.

See Tunis Bros. Co., Inc. v. Ford Motor Co., 952 F.2d 715, 726

(3d Cir. 1991), cert. denied, 112 S. Ct. 3034 (1992).    Plaintiffs

claim that the relevant market is the very narrow one of the

CDACCSN itself, see Appellants' Brief at 15 ("the NASSCO product

. . . constitute[s] the relevant market"),5 and that they

themselves hold a monopoly over the CDACCSN.   Id. at 14-15
("NASSCO possessed monopoly power as to this product market").

Indeed, plaintiffs vigorously assert that the CDACCSN was a

unique system that was incomparable to all others then or since

5
 At other times plaintiffs have argued the market should be "dial
up, computer driven remotely-monitored card-access security
systems in the geographic region served by Bell Atlantic."
Memorandum of Law in Response to Defendants' Motion to Dismiss,
Docket No. 11 at 6-7 n.2; see also App. at 24 (Complaint)
("remotely monitored security devices").

                                9
on the market.   App. at 110 (Pastore Affidavit) ("As late as

1990, it was believed that the system was unprecedented and

unique . . . .   Since 1990 other suppliers have advertised

similar features . . . .   However, NASSCO is not aware of any

installation which duplicates all of the unique features of the

NASSCO system installed at Bell of PA.").6

          For purposes of the matter before us, we hold

plaintiffs to their own contention, see Edward J. Sweeney & Sons,

Inc. v. Texaco, Inc., 637 F.2d 105, 117 (3d Cir. 1980) (plaintiff

bound by relevant market analysis proposed to district court),

cert. denied, 451 U.S. 911 (1981), and we assume arguendo that

the plaintiffs have demonstrated this to be the appropriate

market definition.

          Plaintiffs must thus show that the defendants possessed

"sufficient market power" to come dangerously close to success

within that market.   Fineman v. Armstrong World Indus., Inc., 980
F.2d 171, 197 (3d Cir. 1992), cert. denied, 113 S. Ct. 1285

(1993); Barr Labs., Inc. v. Abbot Labs., 978 F.2d 98, 112 (3d

Cir. 1992).   There is no simple formula:    factors to be reviewed

"include the strength of the competition, probable development of

the industry, the barriers to entry, the nature of the anti-
6
 See also Pastore Affidavit, Docket No. 21 at 6 ("At the time of
the misconduct by Bell, to the best of my knowledge, NASSCO was
the only supplier of such an integrated access control
product."); Plaintiffs' Br. in Opposition to Motion for Summary
Judgment, Docket No. 22 at 5 n.3 ("This is not an instance of a
superior product among inferior competing products. It is an
instance of a product without competitors."); Plaintiffs'
Supplemental Memorandum of Law in Opposition to Motion for
Summary Judgment, Docket No. 33 at 3 ("the NASSCO product
constituted a unique product without parallel or substitute").

                                10
competitive conduct, and the elasticity of consumer demand."    Id.

at 112.   Most significant, however, is the defendants' share of

the relevant market.   See id. (collecting cases).   Indeed, a pair

of the leading antitrust commentators state that "it is clear

that the basic thrust of the classic rule is the presumption that

attempt does not occur in the absence of a rather significant

market share."   Areeda & Turner, supra, ¶ 831 at 336.

           The defendants have submitted an affidavit which states

they are not "engaged in the businesses of (i) remotely

monitoring security alarms or (ii) the manufacture, sale or

provision of equipment used to remotely monitor alarms or card

access security systems."   App. at 70.   The plaintiffs offer no

evidence that the defendants have entered the CDACCSN market.

Indeed, they have confined their discussion to defendants' future

entry into the market.   See, e.g., App. at 24 (Complaint)

(defendants are "intent upon entering); App. at 119 (Pastore

Affidavit) ("in the event that Bell Atlantic is determined to

enter into the alarm monitoring market"); Memorandum of Law in

Response to Defendants' Motion to Dismiss, Docket No. 11 at 2

(defendants are "poised to enter").   Thus, it is clear that the

defendants presently have no share of the CDACCSN market.7
7
 Plaintiffs' position as to the only specific facility that they
did not install, the one at the Monroeville Revenue Accounting
Center, is unclear. Even if this system was "pirated" from
NASSCO, see Pastore Affidavit, Docket No. 21 at 9-10 (defendants
"were simultaneously meeting with another contractor, using
NASSCO's engineering design for the MRAC"); Plaintiffs' Br. in
Opposition to Motion for Summary Judgment, Docket No. 22 at 12
("an unsuccessful effort by defendants' to mimic the NASSCO
product and install and implement that pirated technology at
[MRAC]"), there is no evidence that the defendants attempted to

                                11
Without any share in the relevant market as described by

plaintiffs, there can be no inference that defendants hold

sufficient economic power in that market to create a dangerous

probability of monopoly.   See Nuemann v. Reinforced Earth Co.,

786 F.2d 424, 428 (D.C. Cir.), cert. denied, 479 U.S. 851 (1986);

see also Fineman, 980 F.2d at 201.

          Plaintiffs argue that where there is high degree of

predatory conduct coupled with a transparent intent to

monopolize, the courts have required a less rigorous showing of

market power.   They cite Otto Milk Co. v. United Dairy Farmers

Coop. Ass'n, 388 F.2d 789 (3d Cir. 1967), for this proposition,

but nothing in that case supports this view.    In Otto Milk the

defendants argued that they were not liable because they did not

in fact have a monopoly and we simply held that an attempt claim

under Section 2 "does not require an actual monopoly of the

territory sought."   Id. at 798.

          Three sources relied upon by the plaintiffs do support

their position.   A well-known 1956 law review article by

Professor Turner argued that if "defendants are attempting to

drive someone out of the market by foul means rather than fair,

there is ample warrant for not resorting to any refined analysis

as to whether . . . having taken over all the production of a

particular commodity, the defendants would still face effective

competition from substitutes."     Donald F. Turner, Antitrust

market this system to others. The internal use at one site of
the NASSCO product is insufficient to indicate a dangerous
probability of achieving monopoly power.

                                   12
Policy and the Cellophane Case, 70 Harv. L. Rev. 281, 305 (1956);

see also Edwin S. Rockefeller, Antitrust Questions and Answers 27

(1974) ("If a sufficiently evil intent can be shown--to destroy

or exclude a competitor, control prices, or coerce customers or

suppliers--the Court might not look for any relevant market

beyond the product immediately involved.").     And the district

court in Rea v. Ford Motor Co., 355 F. Supp. 842, 876-77 (W.D.

Pa. 1973), rev'd, 497 F.2d 577 (3d Cir.), cert. denied, 419 U.S.
868 (1974), held that a finding of dangerous probability of

monopoly was unnecessary when overwhelming evidence of specific

intent to monopolize existed.

          However, we reversed the district court in Rea and

noted that a showing of "a dangerous probability of achieving

monopolization in a relevant market" was necessary to prevail on

a section 2 claim. 497 F.2d at 590 n.28.   More generally, the

principle proposed by the sources on which plaintiffs rely was

that adopted by the Ninth Circuit in Lessig v. Tidewater Oil Co.,

327 F.2d 459, 474-75 (9th Cir.), cert. denied, 377 U.S. 993

(1964), a decision this court rejected in Coleman Motor Co. v.
Chrysler Corp., 525 F.2d 1338, 1348 n.17 (3d Cir. 1975), and

again in Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d
105, 117 (3d Cir. 1980), cert. denied, 451 U.S. 911 (1981).

          Further, the Supreme Court unanimously interred Lessig

in Spectrum Sports.    In reversing a Ninth Circuit opinion which

relied on Lessig, it held that intent to monopolize alone "is not

sufficient[] to establish the dangerous probability of success

that is the object of § 2's prohibition of attempts."     Id. at

                                 13
890.   It explained that the "law directs itself not against

conduct which is competitive, even severely so, but against

conduct which unfairly tends to destroy competition itself. . . .

Thus, this Court and other courts have been careful to avoid

constructions of § 2 which might chill competition, rather than

foster it. . . .   For these reasons, § 2 makes the conduct of a

single firm unlawful only when it actually monopolizes or

dangerously threatens to do so.    The concern that § 2 might be

applied so as to further anticompetitive ends is plainly not met

by inquiring only whether the defendant has engaged in 'unfair'

or 'predatory' tactics." Id. at 892 (citations omitted).

           In any event, this is not the case in which we must

consider whether predatory actions by defendants may reduce the

amount of market share that is needed to show a dangerous

probability of success.   Having shown no market share by

defendants, plaintiffs have nothing to couple with their alleged

predatory behavior.

           Accepting everything the plaintiffs say as true, it is

ironic that they basically seek to protect their own monopoly

power in the field of dial-up, computer-driven remotely-monitored

card-access security systems by use of an antitrust suit.      To the

extent that plaintiffs may have rights to the product of their

creativity and initiative, there are other legal doctrines to

protect them.   On this record, the district court did not err in

holding that they have not shown enough to proceed further under

the Sherman Act.

                               III.

                                  14
          For the foregoing reasons we will affirm the judgment
and order of the district court.

                               15