Court Opinion

ID: 8917889
Source: CourtListenerOpinion
Date Created: 2022-11-27 05:50:59.814125+00
Date Added: 2024-06-11T17:09:09.803927
License: Public Domain

MARQUEZ, District Judge,
dissenting and concurring in part:
I respectfully dissent.
This is not a typical case where one distributor conspires with his supplier to terminate a price cutting distributor of the same supplier.
TLC was not a distributor of CIL’s product.
Viewing the evidence in the strongest light favorable to Zidell, the jury could find that:
1) The officers of TLC protested to CIL about the damaging effect the sale of lower priced foreign-made valves was having on its domestic valve sales.
2) TLC asked CIL to take away the exclusive distributorship from Zidell and give it to TLC.
3) At TLC’s request CIL took the exclusive distributorship from Zidell and gave it to TLC.
4) CIL and TLC proceeded to establish a distribution system of the foreign-made valves through TLC’s distributors.
Zidell admits that it cannot prove any anti-competitive effect as a result of this action. There is no evidence of intent to fix prices or to restrain trade nor is there evidence of a conspiracy to monopolize or attempt to monopolize. Zidell is the nation’s largest distributor of foreign-made valves. There is no claim that other foreign-made valves are not available to Zidell.
Only unreasonable restraints of trade are unlawful. Standard Oil Company of New Jersey v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911).
In Packard Motor Company v. The Webster Motor Car Co., 243 F.2d 418, 421 (D.C. Cir.1957), the Court of Appeals for the District of Columbia, in reversing the trial court stated:
When an exclusive dealership “is not part and parcel of a scheme to monopolize and effective competition exists at both the seller and buyer levels, the arrangement has invariably been upheld as a reasonable restraint of trade. In short, the rule was virtually one of per se legality” until the District Court decided the present case.... The fact that any other dealers in the same product of the same manufacturer are eliminated does not make an exclusive dealership illegal; it is the essential nature of the arrangement. The fact that Zell asked for the arrangement does not make it illegal. Since the immediate object of an exclusive dealership is to protect the dealer from competition in the manufacturer's product, it is likely to be the dealer who asks for it.”
The Ninth Circuit has consistently held that it is not a violation of the Sherman Act for a manufacturer to conspire with others to simply switch distributors of one of its exclusive franchises and to cease doing business with a former dealer. Golden Gate Acceptance Corp. v. General Motors, 597 F.2d 676 (9th Cir.1979). Chandler Supply Company v. GAF Corp., 650 F.2d 983 (9th Cir.1980).
In Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., 416 F.2d 71, 76 (9th Cir.1969), cert. den. 396 U.S. 1062, 90 S.Ct. 752, 24 L.Ed.2d 755 (1969), reh. den. 397 U.S. 1003, 90 S.Ct. 1113, 25 L.Ed.2d 415 (1969), the court said:
Not every agreement is per se “in restraint of trade” within the meaning of § 1. See White Motor Company v. United States (1963) [372 U.S. 253] 83 S.Ct. *1475696 [9 L.Ed.2d 738]. Thus, it is well settled that it is not a per se violation of the antitrust laws for a manufacturer or a supplier to agree with the distributor to give him an exclusive franchise, even if this means cutting off another distributor. United States v. Arnold Schwinn & Co., 1967, 388 U.S. 365, 336, 87 S.Ct. 1856, 18 L.Ed.2d 1249; (other citations omitted).
The court went on to state:
Here, plaintiff presented no evidence whatsoever that either Seagram or Barton had any anticompetitive motive for terminating plaintiff as their distributor.
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We think it indisputable that a single manufacturer or seller can ordinarily stop doing business with A and transfer his business to B .... And the decisions cited, supra pp. 76-77, make it clear that the decision of the seller to transfer his business from A to B is valid even though B may have solicited the transfer and even though the seller and B may have agreed before the seller terminates his dealings with A. No case cited to us, and none that we have found, actually go so far as the plaintiff claims. Id. at 78.
Joseph E. Seagram & Sons, Inc., supra, has been followed by the Fifth Circuit. See Aladdin Oil Company v. Texaco, Inc., 603 F.2d 1107 (5th Cir.1979).
In Aladdin Oil, supra, at 1113, the court stated:
Only when conserted activity is manifestly anti-competitive are per se rules of illegality applicable. (Citations omitted). Accordingly, a seller has a unilateral right to select its customers and to refuse to sell its goods to anyone, for reasons sufficient to itself.
The courts have repeatedly held that the substitution of one exclusive distributor for another is lawful on the ground that the antitrust laws serve to protect competition, not competitors, and that such substitution does not reduce the number of distributors competing. Ace Beer Distributors, Inc. v. Kohn, Inc., 318 F.2d 283 (6th Cir.1963), cert. denied, 375 U.S. 922, 84 S.Ct. 267, 11 L.Ed.2d 166 (1963).
Where one distributor has been replaced by another, the defendants have generally been successful in moving for summary judgment on the ground that even if the conspiracy existed, “the object to be achieved was not one rendered obnoxious by the Sherman Act.” Chandler Supply v. GAF Corp., supra; Golden Gate Acceptance Corp. v. General Motors Corp., supra.
Similarly, in Burdett Sound, Inc. v. Altec, Corp., 515 F.2d 1245, 1249 (5th Cir.1975) the court stated:
Lest any other former distributors succumb to the temptation of treble damages, we reiterate that it is simply not an antitrust violation for a manufacturer to contract with a new distributor, and as a consequence, to terminate his relationship with a former distributor, even if the effect of a new contract is to seriously damage the former distributor’s business.
It should be kept in mind that Zidell is not without recourse. Zidell has pending a cause of action for breach of contract. The courts should not convert ordinary business torts into per se antitrust violations.
I would grant judgment in favor of the defendants on the antitrust action.
I concur in the majority’s decision in the breach of contract action.