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March 28, 1977

Giant Paper and Film Corp. and Merchant Suppliers Paper Co.
Albemarle Paper Co. and Hoerner Waldorf Corp.

The opinion of the court was delivered by: DUFFY

Opinion and Order

DUFFY, D.J.: This case was placed on the ready trial calendar, all discovery having been completed. Defendants now move for partial summary judgment based on the pleadings, discovery and affidavits submitted in support of the motion.

This action was commenced in August, 1973, seeking treble damages for alleged violations of the federal antitrust laws, particularly Sections 1 and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2, and Section 3 of the Clayton Act, 15 U.S.C. § 14. Defendant Hoerner Waldorf Corporation ("Hoerner Waldorf") is an integrated manufacturer of paperboard and paperboard products. On October 31, 1968, it acquired all the assets of defendant Albemarle Paper Company ("Albemarle"), including a Kraft process pulp and paper mill located at Roanoke Rapids, North Carolina. Prior to its acquisition as a Hoerner Waldorf subsidiary, Albemarle was engaged in the manufacture and distribution of pulp and various types of paper, including Kraft wrapping paper.

 Plaintiffs are parent and subsidiary corporations engaged in the business of supplying a variety of products including Kraft wrapping paper, to the apparel industry. It is undisputed that for some thirty years prior to the Albemarle acquisition in 1968 plaintiffs had purchased all of their requirements of Kraft paper from Albemarle's Roanoke Rapids mill at liberal payment and discount terms. After the acquisition by Hoerner Waldorf, plaintiffs were assured that their supply relationship would not be altered, and through 1971, plaintiffs' Kraft paper needs continued to be met by the Albemarle subsidiary. However, the supply relationship began to change. Plaintiffs' discount and payment practices were contrary to Hoerner Waldorf's credit policies and triggered heated discussions between the parties. On one occasion, as a result of Hoerner Waldorf's enforcing the invoice terms, plaintiffs remitted $3,100 taken in discounts; during the same period, after complaining of paper quality, plaintiffs returned a shipment to the Roanoke Rapids mill.

 Sometime in late 1971 or early 1972, representatives of defendants informed Irving Jacklin, plaintiffs' president, that plaintiffs' supply of Kraft paper would be reduced since Hoerner Waldorf's internal demand for the paper had substantially increased. A cut back followed. In January 1973, purportedly as a result of the rising internal demand, coupled with the continuing payment, discount and quality disputes between the parties, defendants ceased supplying plaintiffs. The termination coincided with a nationwide shortage of Kraft paper and, despite plaintiffs' securing an alternate supplier in 1971 who supplied comparatively minimal amounts of Kraft paper to plaintiffs through 1974, plaintiffs claim that they were totally eliminated from the Kraft paper market.

 On December 31, 1974 Albemarle was merged into its parent, Hoerner Waldorf. *fn1" Plaintiffs do not claim damages after this date.

 All of plaintiffs' antitrust claims are rooted in defendants' decision to sever the supply relationship with plaintiffs during a nationwide Kraft paper shortage. The question presented by this motion is whether the pleading and proof submitted by plaintiffs are sufficient to raise any genuine factual issues as to the elements necessary to constitute the alleged antitrust violations. In resolving this question, I am not unmindful of judicial reluctance to grant summary judgment in complex antitrust cases; See Poller v. Columbia Broadcasting System, 368 U.S. 464, 472, 7 L. Ed. 2d 458, 82 S. Ct. 486 (1962), but I am equally aware that plaintiffs have had very opportunity to develop the facts to support their claims while completing substantial amounts of discovery of a two-and-one-half year period. See Beckman v. Walter Kidde & Company, 316 F. Supp. 1321 (S.D.N.Y. 1970), aff'd, 451 F.2d 593 (2d Cir. 1971), cert. denied 408 U.S. 922, 33 L. Ed. 2d 333, 92 S. Ct. 2488 (1972).

 Exclusive Dealing

 Plaintiffs contend that because they were required to look exclusively to defendants for their total supply of Kraft paper, defendants violated Section 3 of the Clayton Act, 15 U.S.C. § 14, prohibiting exclusive dealing arrangements. *fn2" Defendants claim that no contractual restraint was ever imposed on plaintiffs and that plaintiffs have adduced no proof to evidence any arrangement other than an election to buy exclusively from Albemarle, and later, Hoerner Waldorf, so long as it was advantageous to do so.

 To support their position, plaintiffs have submitted letters from S. Douglas Fleet, Albermarle's Vice-President and Sales Manager from 1940 to 1963, and Larry Norton, Fleet's successor, who became Vice-President of Hoerner Waldorf's Mill Division after the acquisition of Albemarle. The Fleet letter merely attests to the length of the supply relationship between Albemarle and plaintiffs. (Pl. Ex. Al). The Norton letter, dated September 3, 1968, indicates that, despite the acquisition, Albemarle "intends to continue to do business as usual," and advises plaintiffs that "there should be no reason why you should look for another source of supply on your regular Natural Wrapping." (Pl. Ex. Dl). Although it is doubtful that this letter evidences a factual issue as to an interdiction of the type claimed, particularly since plaintiffs contacted an alternate source in late 1971 which supplied them with Kraft paper, albeit in small amounts, even were the exclusivity allegation taken as true, the Clayton Act claim must fail as a matter of law.

 Section 3 prohibits exclusive dealing agreements only if competition in a substantial share of the line of commerce affected is foreclosed as a result. Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 5 L. Ed. 2d 580, 81 S. Ct. 623 (1961). Such a determination turns on a detailed analysis of the relevant market and the context in which the exclusive dealing arrangement is employed. Id. Plaintiffs allege neither competitive effect nor market impact resulting from the supply arrangement with defendants, relying, instead, on a per se violation resulting from the mere fact of exclusivity. *fn3" This position directly contravenes Tampa Electric, which rejected a per se approach. Since no effective Section 3 violation has been alleged either in the pleadings or after discovery, no factual issue exists with respect to this claim. Summary judgment in favor of defendants is therefore granted on this issue.

 Conspiracy in Restraint of Trade

 Section 1 of the Sherman Act, 15 U.S.C. § 1, prohibits conspiracies in restraint of trade. Plaintiffs charge both an intra-enterprise conspiracy between Hoerner Waldorf and Albemarle, and a conspiracy between defendants and third parties to drive plaintiffs out of the Kraft paper market. Defendants argue, without conceding restraint of trade, that the proof submitted shows a clear absence of the concert of action required for a Section 1 violation. *fn4"

 With regard to the intra-enterprise conspiracy claim, it is clear that the concerted action of a parent corporation and its subsidiary is not necessarily immunized from a Section 1 challenge by reason of their common ownership. Perma-Life Mufflers, Inc. v. Int'l Parts Corp., 392 U.S. 134, 141-42, 88 S. Ct. 1981, 20 L. Ed. 982 (1968); Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211, 215, 95 L. Ed. 219, 71 S. Ct. 259 (1951); United States v. Yellow Cab Co., 332 U.S. 218, 227, 91 L. Ed. 2010, 67 S. Ct. 1560 (1947). However, if the two entities, notwithstanding their separate status, functioned essentially as a single business unit, the conspiracy claim ...

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