The opinion of the court was delivered by: NEAHER
This private antitrust action was commenced on September 24, 1973 by Diehl & Sons, Inc. ("Diehl") and its subsidiary, Truck Rent-A-Center, Inc. ("TRAC"), against International Harvester Company ("Harvester") and International Harvester Credit Corporation ("IHCC"), its wholly-owned subsidiary. The original complaint has in effect been superseded by a supplemental complaint filed May 27, 1975, in which plaintiffs allege eight causes of action: two claims of § 1 conspiracy in restraint of trade, 15 U.S.C. § 1, and two claims of attempted monopolization, 15 U.S.C. § 2 (Counts One and Eight); two price discrimination claims, 15 U.S.C. § 13(a), (d) and (e) (Counts Two and Three); two Dealer-Day-In-Court-Act claims, 15 U.S.C. §§ 1221, et seq. (Counts Four and Five); and two State claims (Counts Six and Seven). Harvester has counterclaimed against Diehl for money allegedly due and owing on open account.
The case is now before the court on defendants' motions for dismissal of all of plaintiffs' alleged claims for failure to state a claim, Rule 12(b)(6), F.R.Civ.P., or for summary judgment, Rule 56, F.R.Civ.P., and for summary judgment on Harvester's counterclaim for money owed.
In considering defendants' motion for summary judgment, the court will accept as true factual statements in plaintiffs' affidavits submitted in opposition to the motion and draw all permissible inferences in their favor. Hill v. A-T-O, Inc., 535 F.2d 1349, Slip Op. 3627, 3635 (2 Cir. 1976). With that in mind, the following facts appearing in the parties' affidavits do not seem to be in genuine dispute.
Harvester, whose principal offices are in Chicago, Illinois, manufactures trucks, parts and accessories, which it sells through both its own 151 sales branches and some 2,231 franchised dealers. IHCC's sole business is extending credit to finance vehicle sales.
Diehl, located in Queens, New York, was, until April 21, 1975
a distributor of Harvester trucks, parts and accessories. Diehl is owned and operated principally by John H. Schwenter and Robert L. Austin, both of whom are former Harvester employees who purchased the Diehl distributorship in 1963.
Since March 1971, Diehl has also been a distributor of trucks for Mercedes-Benz of North America and during July 1975, Diehl obtained a Volvo dealership. Plaintiff TRAC was organized in 1965 and is engaged in the leasing of trucks, chiefly Harvester trucks.
The contractual arrangements between Diehl and Harvester are governed by the provisions of a "Light and Medium Duty Dealer Sales and Service Agreement" and a "Heavy Duty Dealer Sales and Service Agreement." Both agreements provide for unilateral termination by Harvester only if Diehl breaches certain specified contractual obligations. §§ 27(c), 28.
Schwenter and Austin contend that since late 1970, the business relationship between Diehl and Harvester has continually deteriorated, leading to the commencement of this action in September 1973, and eventually to the cancellation by Harvester of the Diehl distributorship on April 21, 1975.
Both Schwenter and Austin attribute this erosion of their relationship with Harvester to the latter's design to increase its own sales branches' share of the retail market in its trucks and parts at the expense of its independent dealers. Instances of Harvester's "bad faith" fall generally into four major groups: intentionally slowing down delivery to Diehl of ordered trucks, inducing Diehl's customers to deal directly with Harvester, impairing Diehl's credit, and discriminating in price in favor of TRAC's competitors, all calculated to embarrass and ruin Diehl as an independent Harvester distributor.
The following examples are proffered in support of Diehl's charges.
In December 1973, Diehl placed an order for 15 trucks with Harvester for one of its most valuable customers, Beers, Inc. Harvester originally promised delivery by September 1974, which was important to Beers because new federal regulations concerning air brakes scheduled to go into effect March 1, 1975, would substantially increase the trucks' cost. When delivery was not made by September 1974, Austin contacted Harvester's regional office and was informed that due to a strike at one of Harvester's factories delivery could not be made before January 1975. On October 8, 1974, Diehl received a form notice from Harvester cancelling the order for ten of the trucks and giving as the reason for the cancellation Harvester's inability to manufacture the trucks prior to March 1, 1975. The form notice goes on to recite that the trucks may be reordered and will be processed in the same order as the original order. On October 15, 1974, Schwenter wrote Harvester complaining in strong language about Diehl's loss of good will and possible litigation resulting from Harvester's non-delivery prior to March 1, 1975 and expressing his belief that Harvester was trying to force Diehl out of business. The letter went unanswered. Diehl resubmitted the order at the increased price in November 1974. Harvester subsequently twice notified Diehl of further delays and, as of May 1975, only one truck had been delivered.
Austin suspected bad faith on Harvester's part because another truck order placed about the same time as the Beers order was filled only several months thereafter. Concededly, there was only one truck involved in that order and Diehl's customer exerted pressure directly on Harvester for quick delivery.
In 1970, Diehl managed to lure a major truck lessee from Ford trucks to Harvester trucks. Diehl's client was to lease 27 trucks from TRAC but IHCC refused to finance Diehl's purchase of the trucks until Diehl and TRAC obtained a guarantee of the lease by another company at considerable expense to Diehl and TRAC. Schwenter contends IHCC financing is normally easily obtained. He further asserts that Harvester later stole this client's business altogether by having its San Francisco branch quote the client a price equal to or below dealer's cost. Harvester also refused to give Diehl a sales assistance commission for bringing the client to its attention.
Similarly, Diehl contends that beginning toward the end of 1972, Harvester's sales branches in the New York area began contacting Diehl's customers and offering to sell them parts at substantial discounts from dealer cost.
Along the same lines, Austin states that as of approximately March 1975, Harvester granted the United States Postal Service, including its Manhattan branch, a former Diehl customer, a discount on Harvester parts purchased directly from its depot in Fort Wayne, Indiana. This discount, which is really the dealer's net cost, effectively foreclosed Diehl from any postal business, which in 1974 amounted to $200,000 in sales and $40,000 in profits to Diehl.
Schwenter further contends that in 1971 Harvester interfered with Diehl's efforts to obtain bank financing by reporting to the bank in question that Diehl had recently been delinquent in paying its bills on time. Harvester, according to Schwenter, also has, since 1970, been dilatory in processing Diehl's claims for credit for warranty work done by it, for parts returned, and for other items. Diehl's financial position was further worsened, according to Schwenter, by Harvester's pressuring Diehl, in 1972 and 1973, to purchase excessive inventory items (trucks and parts).
Schwenter also claims that Harvester has for a long time granted Hertz Corporation, a competitor of TRAC, discriminatory prices in the form of unrealistically large used truck allowances, extended warranties and labor reimbursements ($17 per hour as opposed to $15 per hour to Diehl) on warranty work, all of which, Diehl contends, amounts to price discounts.
Finally, Schwenter relates Diehl's abortive attempt, prior to cancellation, at selling its dealership. During 1974, Diehl had located one I.G. Sargiss, who expressed a willingness to purchase Diehl for $125,000 plus parts and inventory at book value and Diehl's building at fair market value. Schwenter informed Harvester of the negotiation with Sargiss on March 24, 1975 and was told he could proceed with the discussions. On April 18, Schwenter arranged a meeting for April 21 with Harvester officials in Philadelphia for the purpose of obtaining their consent to the sale to Sargiss. However, when he and Austin met with Harvester officials on April 21, they were not permitted to discuss the proposed sale to Sargiss, but were, instead, given notices of immediate cancellation of the dealership and demanding immediate payment of all amounts due Harvester and IHCC and return of all trucks and parts not yet paid for.
Harvester for its part attributes the deterioration in its relationship with Diehl to the latter's breach of their dealership agreement. According to statements in affidavits submitted by Harvester, Diehl, in November 1970, falsely reported to Harvester that 33 Harvester trucks, not on Diehl's premises, were at an independent body repair shop. A physical check of the body shop's premises by Harvester revealed that only one of the 33 trucks was actually there. Subsequent investigation showed that the trucks had already been delivered by Diehl to its customers without payment having been made to Harvester, as required under their agreement. As a result of this affair, Diehl was reprimanded, placed on a C.O.D. basis and subjected to frequent inventory checks.
Schwenter and Austin both admit that Harvester was not paid in full prior to invoicing trucks to Diehl's customers, but contend that until late 1970 Harvester, although aware, had never complained of this practice.
Harvester has also submitted correspondence between its personnel and Sargiss and a sworn statement by Sargiss indicating that Harvester was interested in placing a new dealership in the area formerly covered by Diehl.
Against that background, we turn to a discussion of plaintiffs' antitrust claims and defendants' motion for their summary dismissal.
Diehl alleges that at least since 1965 and continuing to the present, Harvester and IHCC
"together with co-conspirators presently unknown to plaintiffs, have conspired or contracted to restrain trade in, and have attempted and are attempting to monopolize, the distribution and sale and leasing of Harvester trucks as well as parts and accessories therefor in the New York market . . . ." Supplemental Complaint para. 14.
Diehl further alleges that Harvester and IHCC engaged in the following acts, among others, in support of their plan to "eliminate plaintiffs as competitors" charging plaintiffs higher prices for trucks, parts and accessories than were charged to plaintiffs' competitors,
including Harvester's own sales branches;
compelling plaintiffs to maintain excessive inventories; failing to promptly deliver trucks, parts and accessories ordered by plaintiffs; granting more favorable warranties and credit terms to plaintiffs' competitors; arbitrarily disallowing plaintiffs' warranty claims; inducing actual and potential customers of plaintiffs to deal directly with Harvester branches and generally interrupting the normal good faith dealings between manufacturer and distributor. Supplemental Compl. paras. 14, 15. Diehl contends that these practices were intended to, and did in fact, seriously impair its ability to compete with Harvester's own sales branches. Finally, Diehl alleges that the April 21, 1975 termination of its dealership and the refusal to permit its sale to Sargiss were in furtherance of the conspiracy. Supplemental Compl. para. 79.
Based on the affidavits and documents produced by plaintiffs in opposition to defendants' motion, which were detailed above, the court must assume for purposes of this motion that Harvester is engaged in a program of increasing branch sales at the expense of its independent dealers. See particularly Affidavit of James M. Rhodes (5/23/75) and attached documents.
In order to sustain the § 1 conspiracy claim, plaintiffs must establish both (1) a conspiracy, combination or contract, and (2) that such conspiracy, combination or contract is an undue restraint of trade. House of Materials, Inc. v. Simplicity Pattern Co., 298 F.2d 867, 870 (2 Cir. 1962).
Defendants' attack on the § 1 claim is two-pronged: (1) plaintiffs have failed to plead or to discover any identifiable, independent co-conspirators, as they must ultimately do to sustain their claim, GAF Corp. v. Circle Floor Co., 329 F. Supp. 823, 827 (S.D.N.Y. 1971), aff'd, 463 F.2d 752 (2 Cir. 1972); New Amsterdam Cheese Corp. v. Kraftco Corp., 363 F. Supp. 135, 138 (S.D.N.Y. 1973); and (2) there is no restraint of trade involved in the elimination of the Diehl dealership.
Plaintiffs acknowledge the need to show co-conspirators but maintain that they have identified several, e.g., IHCC, Harvester's sales branches and some of TRAC's competitors, such as Hertz and A.A. Truck Renting Corp., and that in any event discovery to date has been inadequate and additional discovery may reveal others. Defendants rejoin ...