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BECKMAN v. WALTER KIDDE & CO.

September 22, 1970

Michael Beckman, Plaintiff
v.
Walter Kidde & Co., Inc. and Fyre-Safety, Inc., Defendant


Bartels, District Judge.


The opinion of the court was delivered by: BARTELS

BARTELS, District Judge.

Plaintiff, Michael Beckman, entered into a written Regional Distributorship Agreement with the defendant Fyre-Safety, Inc., *fn1" whereby Beckman was granted the exclusive right in certain New York counties to sell fire alarm systems manufactured by the defendants. At the same time Fyre-Safety entered into an oral understanding with Beckman granting Beckman the right to purchase from Fyre-Safety fire extinguishers purchased from the co-defendant, Walter Kidde & Company, Inc. *fn2" In March, 1967, the defendants refused to sell any more fire extinguishers to Beckman. Claiming that both defendants and their distributors or other "businessmen" had conspired to restrain and monopolize commerce in violation of Sections 1 and 2 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. ยงยง 1 *fn3" and 2, *fn4" Beckman brought this action for treble damages and reasonable attorney's fees. He now moves for summary judgment upon these claims, and the defendants cross-move for the same relief. The facts as set forth in Beckman's pleadings and affidavits are susceptible of a brief exposition.

 After the execution of the written franchise agreement and the oral agreement with respect to fire extinguishers, Fyre-Safety, in March, 1967, refused to continue to sell Beckman fire extinguishers which they had previously supplied. Beckman asserts that this refusal to sell was pursuant to a conspiracy with distributors or businessmen and therefore constitutes a per se violation of the Sherman Act. The allegation of conspiracy first appears in the complaint wherein Beckman alleges that "on or about the 8th day of March, 1967, the defendant, Walter Kidde & Company, Inc., entered into an agreement with its distributors of fire extinguishers other than the plaintiff wherein and whereby it was agreed that the plaintiff would be denied the right to make further purchases of the Walter Kidde line of fire extinguishers." In his affidavit in support of his motion for summary judgment Beckman's only reference to a conspiracy is his description of the cause of action as one "to recover damages under Sections 1 and 2 of the Sherman Act upon the ground that the defendants conspired with other businessmen to deprive the plaintiff of access to merchandise which the plaintiff had been previously selling and renting to members of the general public."

 Kidde and Fyre-Safety do not contest the contractual background and the refusal to sell but strongly dispute Beckman's allegation that Fyre-Safety refused to ship to Beckman because of a conspiracy. In support of this position, the defendants submitted the affidavit of William R. Yocom (the National Sales Director for Fyre-Safety in the years 1966 and 1967), wherein he states that he is thoroughly familiar with the facts of the case and that he categorically denies the existence of any conspiracy. He further deposes that Fyre-Safety was always willing to sell fire extinguishers to Beckman but that Beckman refused to pay Fyre-Safety's price increase for the extinguishers. Yocom further avers in his affidavit that "Fyre-Safety was a small company, Kidde itself does not dominate the fire extinguisher field, and plaintiff could easily have purchased fire extinguishers from any number of companies some smaller and some larger than Kidde." Beckman does not dispute this latter statement.

 Beckman in his affidavit in opposition to defendants' cross-motion for summary judgment denies that the refusal was predicated upon a price increase but states that there was a flat refusal to sell, and that the defendants nowhere in their papers have indicated the amount of such increase for the fire extinguishers and whether it applied equally to the customers of both defendants. In the same affidavit Beckman states that "when we have the answers to these questions, we might find an inter-company conspiracy as well as a conspiracy between the defendants and their other dealers. This case cries out for the full use of all the Discovery Procedures set forth in the Federal Rules of Civil Procedure." Following the alleged refusal to sell on March 8, 1967, Beckman terminated his distributorship agreement with Fyre-Safety by means of a letter dated April 12, 1967, written by his attorney, in which no mention was made that the termination was in any way due to defendants' refusal to sell or to any conspiracy.

 The motions for summary judgment are addressed to both Section 1 and Section 2 claims under the Sherman Act. Section 2 prohibits monopolizing, or attempting to monopolize, or combining with others to monopolize, trade or commerce within any defined market. As to Section 2, the complaint and supporting affidavits are bereft of any statement showing or suggesting that either defendant violated this section; consequently, with respect to this claim, plaintiff's motion must be and is hereby denied and defendants' cross-motion must be and is hereby granted. McElhenney Co. v. Western Auto Supply Company, 269 F.2d 332, 339 (4th Cir. 1959); see Periodical Distributors, Inc. v. American News Company, Inc., 416 F.2d 1330 (2d Cir. 1969); Top-All Varieties, Inc. v. Hallmark Cards, Inc., 301 F. Supp. 703 (S.D.N.Y. 1969).

 The real issue in this case concerns plaintiff's motion for summary judgment under Section 1 of the Sherman Act and defendants' cross-motion for summary judgment with respect to the same claim. This section proscribes any contract, combination, or conspiracy in restraint of trade. To recover under this section plaintiff must establish (1) that there was a contract, combination, or conspiracy, and (2) that such contract, combination, or conspiracy was in undue restraint of trade. House of Materials, Inc. v. Simplicity Pattern Co., 298 F.2d 867 (2d Cir. 1962). The question posed is whether the complaint and affidavits of Beckman are sufficient to raise any genuine issue concerning the two material facts above delineated. At the argument the court observed that Beckman's complaint and initial affidavits were conclusory in nature and lacked the necessary specifics to raise a genuine issue as to a material fact concerning either of the two elements necessary to constitute a Section 1 violation.

 The purpose of a summary judgment is to screen out sham issues and "to discover whether one side has no real support for its version of the facts," (Community of Roquefort v. William Faehndrich, Inc., 303 F.2d 494, 498 (2d Cir. 1962)), and "summary judgment cannot be defeated by the vague hope that something may turn up at trial." Perma Research and Development Co. v. Singer Co., 410 F.2d 572, 578 (2d Cir. 1969); see Radio City Music Hall Corporation v. United States, 135 F.2d 715 (2d Cir. 1943); Jones v. Borden Company, 430 F.2d 568, 5th Cir., July 15, 1970. Following the caveat of the Court of Appeals that "there may be some instances where summary judgment is too blunt a procedural device for deciding difficult cases. See, for example, Miller v. General Outdoor Advertising Co., 337 F.2d 944 (2d Cir. 1964)" (Perma Research and Development Co. v. Singer, supra, at 578; Dolgow v. Anderson, 438 F.2d 825 (2d Cir. N.Y. 1970), the court deferred its decision on the motion and offered to set down the application for a hearing one month thereafter, on June 10, 1970, in order to enable Beckman to establish, if possible, any specifics or facts in support of the existence of the conspiracy or the restraint of trade alleged as a per se violation of Section 1. See Rule 43(e), Fed. Rules Civ. Proc., 28 U.S.C.; 6 Moore's Fed. Prac. para. 56.11(7). During this interlude Beckman would have had ample opportunity, by means of discovery, to identify any distributors or others who were parties to the alleged conspiracy and to supply some evidence indicating in what manner there had been a restraint of trade.

 Although in his papers he formally cried out for discovery, Beckman rejected the court's overture with its accompanying opportunity and, instead, relied upon the sufficiency of the complaint and affidavits already submitted. It was the court's inclination to immediately grant summary judgment in favor of the defendants. However, to remove any doubts as to whether any triable issue existed, the court then requested both parties to submit additional affidavits supporting their respective positions, which they did. Beckman submitted two additional affidavits but neither of them indicates that there exists a genuine issue as to a material fact necessary to defeat a summary judgment motion. *fn5" Defendants submitted a second affidavit by William R. Yocom which substantiates in greater detail their position that the refusal to deal was not pursuant to a conspiracy and that no factual, and hence no triable issue, existed on this claim. Specifically, he states that Fyre-Safety made an independent business decision on the basis of its cost analysis that it could not continue profitably to supply its customers with fire extinguishers without a price increase, that the decision was made without consultation with any distributor, competitor, or any other person, that the increase was applied equally to all distributors who wished to purchase fire extinguishers, and that at all times it was willing and indeed anxious to sell the plaintiff or any other customer fire extinguishers at the increased price.

 Upon examination of the pleadings and the affidavits submitted by both parties, together with Beckman's refusal to resort to any further discovery proceedings, the court is convinced that there is no genuine issue as to a material fact with respect to the alleged violation of Section 1 of the Sherman Act. Accordingly, it hereby grants the defendants' cross-motion for summary judgment and hereby denies plaintiff's motion for summary judgment with respect thereto. Reference to the authorities in support of this conclusion is in order.

 Contract, Combination or Conspiracy

 In both the complaint and his affidavits, Beckman refers to two possible combinations, one involving a conspiracy between Kidde and its distributors, and the other involving the relationship between Kidde and its subsidiary, Fyre-Safety. As to the first, the only answer given by Beckman to the defendants' categorical denial of such conspiracy or combination was a re-allegation by Beckman, without more, of the conclusion that there was a conspiracy between Kidde and its distributors or other businessmen. No specifics were offered as to the identity of those distributors or other businessmen or how or when they illegally conspired or combined. A party cannot raise an issue of fact simply by relying upon the complaint or an affidavit setting forth only a bald conclusion that is flatly denied. Of course, the combination requirements of Section 1 may be satisfied by actions short of actual agreements. Facts indicating conscious parallelism by manufacturers or distributors, enforcement of resale price suggestions (United States v. Parke, Davis & Co., 362 U.S. 29, 4 L. Ed. 2d 505, 80 S. Ct. 503 (1960)), or even unwilling compliance by the plaintiff with a seller's price suggestions (Albrecht v. Herald Company, 390 U.S. 145, n.6, 19 L. Ed. 2d 998, 88 S. Ct. 869, (1968)), might satisfy this requirement. Beckman, however, failed to produce any particulars or facts which would suggest or permit the inference of a combination between Kidde and its distributors or other businessmen. The unembellished allegation of conspiracy, unsupported by any particulars disclosing a triable issue which can be called genuine, although sufficient to stand as a pleading, is insufficient to withstand a motion for summary judgment -- especially after an opportunity has been given to offer details. See Dressler v. MV Sandpiper, 331 F.2d 130 (2d Cir. 1964). Rule 56(e), Fed. Rules Civ. Proc., 28 U.S.C.

 Recognizing the insufficient foundation of the claimed conspiracy between Kidde and its distributors, Beckman sought to save his cause by the belated allegation that Fyre-Safety and Kidde engaged in an illegal conspiracy, citing Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211, 95 L. Ed. 219, 71 S. Ct. 259 (1951), condemning a conspiracy between two subsidiaries of a parent company. Kiefer-Stewart, however, is distinguishable on the crucial ground that the conspiracy in that case was between two competing subsidiary companies, whereas in the instant case Beckman does not contend or offer any evidence to indicate that Fyre-Safety and Kidde were in competition with one another. To the contrary, paragraph Sixth of the complaint alleges that "WALTER KIDDE & COMPANY, INC., dealt with and used the property and assets of the said defendant, FYRE-SAFETY, INC., and the said WALTER KIDDE & COMPANY, INC. so dominated the affairs of the said co-defendant, FYRE-SAFETY, INC., so as to deprive the said FYRE-SAFETY, INC. of a mind, will or existence of its own." *fn6"

 Assuming that there were some discussions between Kidde and its puppet, Fyre-Safety, which resulted in a refusal to sell to Beckman, the court cannot conclude that such discussions constitute a combination within the meaning of Section 1 of the Sherman Act or that they represent more than internal dialogue leading to a decision on the part of a single business unit to exercise its right to select or disenfranchise a particular distributor. See Alpha Distributing Company of California v. Jack Daniel Distillery, Inc., 207 F. Supp. 136 (N.D. Cal. 1961), affirmed, 304 F.2d 451 (9th Cir. 1962). The district court case of Hawaiian Oke & Liquors, Ltd. v. Joseph E. Seagram & Sons, Inc., 272 F. Supp. 915 (D. Haw. 1967), heavily relied on by Beckman in support of a broad application of Kiefer-Stewart, was recently reversed by the Ninth Circuit, stating at the time that "Surely a manufacturer and its national or regional distributor, whether a subsidiary or an independent, can agree to transfer their business from one wholesaler to another without running afoul of the group boycott per se rule, in the absence of some forbidden anti-competitive or monopolistic objective." Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., 416 F.2d 71, 81-82 (9th Cir. 1969), cert. denied, 396 U.S. 1062, 24 L. Ed. 2d 755, 90 S. Ct. 752 (1970). The conclusion that the Kiefer-Stewart principle is inapplicable, is consistent with the virtually unanimous opinion of legal commentators that too broad an application of this principle -- in the words of two such commentators -- "is inconsistent with the basic approach of antitrust limitations on business conduct. It would unreasonably penalize companies that resort to the incorporated form of doing business, ...


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