Court Opinion

ID: 8913630
Source: CourtListenerOpinion
Date Created: 2022-11-27 04:04:24.817698+00
Date Added: 2024-06-11T17:08:46.017466
License: Public Domain

TASHIMA, District Judge,
dissenting:
I respectfully dissent.
I have no dispute with most of the majority’s statement of applicable law. However, on the basis of the record before the district court, I believe that appellant A. H. Cox & Company (“Cox”) had viable and triable claims under both § 1 and § 2 of the Sherman Act. While paying lip service to the law governing summary judgment in antitrust cases, the majority draws every inference against Cox (the resisting party) and misconstrues the relevant market. If, as required, the reasonable inferences arising from the uncontroverted facts are drawn in favor of Cox and if the relevant market is properly defined, summary judgment was improperly granted. I would, therefore, reverse the district court’s grant of summary judgment, and remand this case for trial.
In general, as the majority recognizes, a party moving for summary judgment must prove the absence of any genuine issue of material fact. Fed.R.Civ.P. 56(c); First National Bank v. Cities Service Co., 391 U.S. 253, 290, 88 S.Ct. 1575, 1593, 20 L.Ed.2d 569 (1968) (summary judgment appropriate only in absence of “any significant probative evidence tending to support the complaint”); Ron Tonkin Gran Turismo, Inc. v. Fiat Distributors, Inc., 637 F.2d 1376, 1381 (9th Cir. 1981), petition for cert. filed, 49 U.S.L.W. 3955 (No. 80-2080, June 1, 1981). As the Supreme Court has emphatically stated, summary judgment is rarely appropriate in antitrust litigation, especially when the defendants’ motive and intent are in question. Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473 — 74, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962); see Sierra Wine & Liquor Co. v. Heublein, Inc., 626 F.2d 129,132 (9th Cir. 1980); Industrial Bldg. Materials, Inc. v. Interchemical Corp., 437 F.2d 1336 (9th Cir. 1970). Moreover, every possible factual inference must be drawn in favor of the party opposing a motion for summary judgment. Blair Foods, Inc. v. Ranchers Cotton Oil, 610 F.2d 665, 668 (9th Cir. 1980).
With respect to appellant’s claim that R. 0. Products, Inc. (“R. O.”) and Star Machinery Company (“Star”) conspired to restrain trade in violation of § 1 of the Sherman Act, Cox may well have been able to establish that appellees intended to restrain trade and were successful in their efforts.1 Knutson v. Daily Review, Inc., 548 F.2d 795, 803 (9th Cir. 1976), cert. denied, 443 U.S. 910, 97 S.Ct. 2977, 53 L.Ed.2d 1094 (1977). *1310Although not otherwise contended by Cox at this stage, I agree with the majority that the decision to terminate Cox as a distributor was not a horizontal restraint of trade and, therefore, not a per se violation of the antitrust laws.2 Gough v. Rossmoor Corp., 585 F.2d 381 (9th Cir. 1978). It is also true that prior decisions of this Court have given manufacturers wide latitude in establishing their methods of distribution. Manufacturers have been permitted to grant exclusive dealerships, and to change dealers almost at will, regardless of whether there is good cause for the change. Maj.op. at 1305, 1306; Bushie v. Stenocord Corp., 460 F.2d 116, 119-20 (9th Cir. 1972); Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., 416 F.2d 71, 76 (9th Cir. 1969), cert. denied, 396 U.S. 1062, 90 S.Ct. 752, 24 L.Ed.2d 755 (1970). In this case, however, there is evidence that R. O.’s decision to terminate Cox as a distributor was not reached through an exercise of the independent business judgment of R. O., as the majority implies. See Cernuto Inc. v. United Cabinet Corp., supra, 595 F.2d at 170. Rather, as the majority recognizes, it must be presumed that Star misinformed R. 0. as to Cox’s financial condition, that the decision to terminate was based on this misinformation, and that both Star and R. 0. could have foreseen that the change in distributorships would lead to Cox’s demise, see Maj.op. at 1306, and that it would be difficult for Cox to obtain an alternate source of supply. Cf. Mutual Fund Investors Inc. v. Putnam Management Co., 553 F.2d 620, 627 (9th Cir. 1977) (refusing to find an unreasonable restraint of trade, on the ground that a wide variety of alternative sources of supply were available).
There is adequate evidence in the record to support a finding that Cox was not, in fact, in financial difficulty at the time of Star’s alleged statements to the contrary,3 i. e., Cox’s financial condition is not an uncontroverted fact. If it were shown at trial that Star deliberately tried to undermine *1311Cox by misleading R. O., that fact would be sufficient to take this case out of the general rule of Seagram and its progeny. An otherwise permissible dealership termination may violate the antitrust laws if it is effectuated through predatory practices. Coleman Motor Corp. v. Chrysler Corp., 525 F.2d 1338, 1347 (3d Cir. 1975); cf. Bushie, supra, 460 F.2d at 119-20 (“sinister anti-competitive intent” could not necessarily be inferred from the cancellation of a dealership). Even if Star had a legitimate business reason for wanting to take over the R. 0. distributorship, and even if R. 0. had a legitimate reason for wanting to satisfy Star’s desire, their action would not be immunized from the antitrust laws if it were also motivated by an intent to drive Cox out of business. Taxi Weekly, Inc. v. Metropolitan Taxicab Board of Trade, Inc., 539 F.2d 907, 913 (2d Cir. 1976). As this Court recently stated:
“ ‘Although a company may ordinarily deal or refuse to deal with whomever it pleases without fear of violating the antitrust laws, refusal to deal which is anti-competitive in purpose or effect, or both, constitutes an unreasonable restraint of trade in violation of the Sherman Act,’ even when justified by a legitimate business reason. Whether a defendant refused to deal and, if so, whether the refusal was a product of an anticompetitive motive are factual issues that should not be taken from the jury ‘unless “the evidence is such that without weighing the credibility of the witnesses there can be but one reasonable conclusion as to the verdict.” ’ ”
Program Engineering, Inc. v. Triangle Publications, Inc., 634 F.2d 1188, 1195 (9th Cir. 1980), citing Fount-Wip, Inc. v. Reddi-Wip, Inc., 568 F.2d 1296, 1300 (9th Cir. 1978) (reversing grant of summary judgment and remanding for trial). The fact that Star dominated the market even before the distributorship change requires us to give appellant’s claims particularly careful scrutiny. Columbia Metal Culvert Co., Inc. v. Kaiser Aluminum & Chemical Corp., 579 F.2d 20, 32 (3d Cir.), cert. denied, 439 U.S. 876, 99 S.Ct. 214, 58 L.Ed.2d 190 (1978).
The key step in determining whether Star’s actions might have been unreasonable is to decide whether, given the chance, Cox might have proven that those actions had a significant effect on competition or that they significantly enhanced Star’s market power.4 Havoco of America, Ltd. v. Shell Oil Co., 626 F.2d 549, 558 (7th Cir. 1980); Mutual Fund, supra, 553 F.2d at 627; George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc., supra, 508 F.2d at 562. This is the step over which both the district court and the majority tripped.
It is undisputed that before the events in controversy, Star’s share of the market for small truck-mounted cranes in the Seattle area was in excess of 50%, and that Cox, with a 25% share, was its principal competitor. There is also evidence that only four companies manufactured such cranes, and that their products were substantially interchangeable. The record supports the inference that each distributor’s market share was to a large degree determined by factors within the control of the distributor, other than the brand name of its cranes, such as price, advertising and the quality of service provided. This inference is also supported by the fact that the manufacturers’ respective shares of the national market bore no resemblance to the shares of market held in the greater Seattle metropolitan market by their respective distributors. In deciding Star’s summary judgment motion, the district court should have drawn this inference in appellant’s favor and analyzed the relevant market at the distributor level rather than at the manufacturer level.
*1312Applying this analysis of the market makes the potential anticompetitive effect of Cox’s demise appear much greater than the trial court was willing to acknowledge. The court’s assumption, adopted by the majority, was that the market share of each manufacturer would remain relatively constant, regardless of any changes at the distributor level. The court, therefore, assumed that when Star abandoned the manufacturer it had previously represented (Pitman) and took over the line that had been represented by Cox (R. 0.), Star’s market share would decline from 50 percent to 25 percent, the market share formerly held by Cox. Nothing in the record supports this inference. A much more reasonable inference is that, in light of its strength as a distributor, Star would at least retain its 50 percent market share regardless of which line of cranes it sold. The court also assumed that Fray, the distributor which took over the Pitman line, would immediately accede to a significant market share and would replace Cox as an equally vigorous competitor of Star. This inference also is unsupported by the record. If market share is essentially a function of distributor strength, it is at least as likely that Cox’s former customers were split among its competitors.
Thus, if all reasonable inferences from the record, including the absence of certain facts, are drawn in Cox’s favor as required, Blair Foods, Inc., supra, 610 F.2d at 668, the following inferences may reasonably be drawn: (1) market share in the relevant market is determined at least in significant part by the strength of the distributor, based on factors other than the brand name of its crane line; (2) since nothing in the record demonstrates that Star’s switching of brands weakened it as a distributor at all, Star at least retained its 50-75 percent share of market; (3) since there is nothing in the record as to Fray’s share of market it is unreasonable to infer that it was able, as a new entrant with no identification or goodwill, to immediately capture any significant market share; and (4) the elimination of its primary competitor, Cox, and the entry of a new, unknown competitor, Fray, enabled Star to substantially increase its market share in an oligopolistic market. Accepting these inferences as true, as we must on summary judgment, Cox’s demise may be found to have enhanced Star’s dominance of the market, and adversely affected competition in the market as a whole. See Mutual Fund, supra, 533 F.2d at 627; Knutson, supra, 548 F.2d at 803.
I recognize that the foregoing analysis of anticompetitive effect involves some theorizing on my part, in that the trial court was offered no evidence of what each company’s market share became after Cox’s demise and the entry of Fray. However, appellant adduced the basic facts and a reasonable theory to support its assertion of anticompetitive effect. See Ron Tonkin, supra, 637 F.2d at 1381; Bushie, supra, 460 F.2d at 116. Moreover, the burden of proving that there are no genuine issues of material fact falls on the moving party (in this case, the appellees). Blair Foods, supra, 610 F.2d at 668. Since the effect on competition of Cox’s exclusion from the Seattle small crane market is a material issue of fact, the district court’s grant of summary judgment was improvident, and should be reversed. See Poller, supra, 368 U.S. 472-73, 82 S.Ct. at 490-91.
Finally, in light of the foregoing, I would also reverse the district court’s summary judgment with respect to appellant’s claim under § 2 of the Sherman Act. The district court held that since appellant had not shown any anticompetitive conduct on the part of Star, it would be unable to prove that Star had attempted to monopolize the small crane market.5
The majority’s affirmance of summary judgment against Cox on its § 2 claim is *1313bottomed on its conclusion that “Star’s actions in initiating a dealership change did not adversely affect competition ... . ” Maj.op. at 1309. As I have attempted to explain in connection with Cox’s § 1 claim, such a conclusion can be justified only if the reasonable inferences from the facts in the record are drawn in favor of Star, the moving party. What is involved here is a classic oligopolistic market in which four firms control 95 percent of the market and the top two firms control 70 — 75 percent. In such a market, in my view, no other inference can reasonably be justified in a summary judgment context, absent other compelling evidence as is the case here, than that elimination by the leading firm with a 50 percent share of its primary competitor with a 20-25 percent share from the market is anticompetitive. See Greyhound Computer Corp., Inc. v. International Business Machines Corp., 559 F.2d 488 (9th Cir. 1977). The fact that another firm entered the market does not change the result, absent a showing, which has not been made here, of what that firm’s market share was.
Since I conclude that the effect on competition of Cox’s exclusion from the market is a controverted issue of fact and that Cox may be able to show anticompetitive impact at trial, it was error to grant summary judgment against Cox on its § 2 claim.
I would reverse the judgment and remand the case for trial.

. To avoid summary judgment, a plaintiff alleging a § 1 conspiracy must come forward with specific facts to show that there was an agreement between two or more distinct persons or entities. Blair Foods, supra, 610 F.2d at 671. This burden may be met by producing circumstantial evidence of an agreement. Id. The judgment below simply assumed that Cox would be able to prove the existence of an agreement at trial, but does not explain whether it did so because there was enough evidence to support the possibility that an agreement was made, or whether the court did not believe it necessary to reach that question. In either case, I conclude that there was sufficient evidence before the district court to require a denial of summary judgment on this point. There is little question that Star and R. O. personnel discussed the Cox situation. While Star may have had a legitimate reason for doing so (Star was already an R. O. distributor in another state), a jury could have found that appellees’ action was outside the bounds of their normal business relationship. Cf. Blair Foods, supra, at 672 (appellees held to have given a justifiable explanation for denying credit to appellant). This inference, unlike the others discussed infra was thus correctly drawn in appellant’s favor.

. The majority recognizes that even vertical agreements to exclude competition may sometimes require application of the per se rule. An example is when a manufacturer’s decision to terminate a dealer is prompted by coercion from other dealers. See Cernuto Inc. v. United Cabinet Corp., 595 F.2d 164 (3d Cir. 1979); Majority opinion (“Maj.op.”), at 1305 n.3. While Cox has not alleged that Star coerced its distributor, R. O., it has alleged that Star materially misinformed R. O. with respect to Cox’s financial condition, that Star received confidential information about Cox from an ex-employee of Cox and that Star attempted to hire away some of Cox’s employees.
The majority takes a dim view of the proposition that unfair competitive practices designed to eliminate a competitor should be treated as a per se violation of the Sherman Act. See Maj.op. at 1308 n.7, citing George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc., 508 F.2d 547 (1st Cir. 1974), cert. denied, 421 U.S. 1004, 95 S.Ct. 2407, 44 L.Ed.2d 673 (1975). However, in Paddock Pool, the First Circuit distinguished one of its own earlier cases, Albert Pick-Barth Co. v. Mitchell Woodbury Corp., 57 F.2d 96, cert. denied, 286 U.S. 552, 52 S.Ct. 503, 76 L.Ed. 1288 (1932), and two subsequent cases from other courts, Perryton Wholesale, Inc. v. Pioneer Distributing Co., 353 F.2d 618 (10th Cir. 1965), cert. denied, 383 U.S. 945, 86 S.Ct. 1202, 16 L.Ed.2d 208 (1966) and C. Albert Sauter Co. v. Richard S. Sauter Co., 368 F.Supp. 501 (E.D.Pa.1973). This case bears a much closer resemblance to the facts of the three cases distinguished in Paddock Pool than to Paddock Pool itself, inasmuch as Star’s actions were clearly directed against Cox and were not simply an effort to win over Cox’s customers. Cf. Paddock Pool, supra, 508 F.2d at 560-562 (appellee’s conduct was an attempt to win customers rather than damage the organization of appellant).
Nevertheless, the majority was correct in refusing to characterize Star’s alleged conduct as a per se violation. Several circuits have recently rejected the Pick-Barth doctrine entirely. See, e. g., Havoco of America, Ltd. v. Shell Oil Co., 626 F.2d 549, 555-56 (7th Cir. 1980); Stifel, Nicolaus & Co., Inc. v. Dain Kalman & Quail, Inc., 578 F.2d 1256 (8th Cir. 1978); Northwest Power Products, Inc. v. Omark Industries, 576 F.2d 83, 88 (5th Cir. 1978), cert. denied, 439 U.S. 1116, 99 S.Ct. 1021, 59 L.Ed.2d 75 (1979). It is worth noting, however, that each of these also held that allegations of unfair competition may be within the scope of the antitrust laws when the Rule of Reason test is applied. See, e. g., Havoco, supra, at 626 F.2d 556.

. Cox received a $300,000 infusion of new capital shortly before its distributorship was terminated.

. Under the test used in this Circuit, the unreasonableness of a particular agreement may be established by showing either that the parties intended to restrain trade or that they succeeded in doing so. Knutson, supra, 548 F.2d at 803. In practical terms, however, it is difficult to prove unreasonable intent without proving some effect on competition. See Borger v. Yamaha International Corp., 625 F.2d 390, 397 n.4 (2d Cir. 1980).

. In order to be held liable under § 2, a defendant must be demonstrated to have (1) specifically intended to control prices or exclude competition, and (2) engaged in predatory conduct' directed to the accomplishment of that unlawful purpose. Maj.op. at 1308; Hunt-Wesson Foods, Inc. v. Ragu Foods, Inc., 627 F.2d 919, 924-26 (9th Cir. 1980), cert. denied, 450 U.S. *1313921, 101 S.ct. 1369, 67 L.Ed.2d 348 (1981). However, specific intent to monopolize is generally inferred from anticompetitive conduct. Id. While the courts have sometimes also required a showing of dangerous probability of monopolization, see e. g., Cornwell Quality Tools Co. v. C.T.S. Co., 446 F.2d 825, 832 (9th Cir. 1971), cert. denied, 404 U.S. 1049, 92 S.Ct. 715, 30 L.Ed.2d 740 (1972), that requirement, as demonstrated, infra, was also met in this case.