decided: January 24, 1980.
NIFTY FOODS CORPORATION, PLAINTIFF-APPELLANT,
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC. AND PET INCORPORATED, DEFENDANTS-APPELLEES .
Appeal from judgment in the United States District Court for the Western District of New York, Harold P. Burke, Judge, dismissing civil antitrust, breach of contract, inducement of breach and unfair competition action by former supplier of goods against former buyer and substituted supplier. Affirmed.
Before Lumbard, Smith and Mulligan, Circuit Judges.
This is an appeal from a judgment of the United States District Court for the Western District of New York, Harold P. Burke, Judge, dismissing plaintiff's civil action based on antitrust, breach of contract, unfair competition and other claims.
This suit was prompted by a decision of the Great Atlantic & Pacific Tea Company ("A&P") to substitute Pet Incorporated ("Pet") for Nifty Foods Corporation ("Nifty") as the supplier of A&P's private label frozen waffles. Nifty filed a complaint in 1971, naming A&P and Pet as co-defendants and charging in seven counts breach of contract, unfair competition, tortious inducement of breach and violation of the antitrust laws. Since Nifty and A&P are both citizens of the State of New York, jurisdiction was apparently predicated on the alleged violations of the Sherman Act, 15 U.S.C. §§ 1 and 2, and 28 U.S.C. § 1331.
After seven years of discovery, Nifty indicated that it was ready for trial. A&P then moved for summary judgment on one count under Fed.R.Civ.P. 56 and for an order dismissing three other counts for failure to state a claim under Fed.R.Civ.P. 12(b)(6). Pet moved for summary judgment on all six of the counts in which it was named and A&P joined in the motion with respect to the counts remaining against A&P. In an order dated October 24, 1978, all of the above motions were granted, and all the claims against A&P and Pet were dismissed. Nifty filed a notice of appeal. For the reasons given below, we affirm.
Nifty, a manufacturer of frozen foods, began supplying A&P with frozen waffles in 1961 under A&P's private label trademark "Sunnyfield." Until 1969, Nifty was the exclusive supplier of "Sunnyfield" waffles.
Pet entered the frozen waffle business in 1963. It tried to secure A&P's private label business, but had no success until 1969. In December 1968, Pet sent A&P a form letter announcing a limited duration advertising allowance for private and packer label frozen waffles. On January 6, 1969, A&P called Pet requesting a frozen waffle price list. A&P indicated in late May that Pet would become co-supplier, with Nifty, of "Sunnyfield" waffles.
On July 2, Nifty received a letter from A&P stating that Nifty would no longer be supplying certain A&P warehouses with waffles. The letter referred to a conversation several months earlier at which Nifty had expressed concern that it might lose some of the A&P business.
Nifty placed a large order for "Sunnyfield" cartons sometime in July with its carton supplier, The Brown Company ("Brown"). Brown in turn ordered the board for the cartons. On August 22, 1969, A&P called Pet to ask for assistance in verifying whether Nifty had placed a large "Sunnyfield" order with Brown, and if so, whether the order could be canceled. Pet called Brown and learned that an order had been placed, but that the status of the Nifty contract was "unclear." The board was in transit, Brown reported, but it could still be used for other orders. A&P then warned Nifty, in a letter date August 27, 1969, that A&P would not be responsible for any cartons other than those which Nifty already had on hand.*fn1
On October 10, A&P told Pet that it would become the sole supplier of "Sunnyfield" waffles effective November 15, 1969. Sometime after October 15, 1969, A&P bought all of Nifty's remaining inventory of "Sunnyfield" waffles. In March 1970, Nifty ceased doing business.
Count I of the complaint alleged that A&P and Nifty entered into an exclusive requirements contract for the sale of "Sunnyfield" waffles, and that this contract contained an implied term requiring A&P to give Nifty reasonable notice of termination. Nifty alleges that A&P breached this implied term when it terminated Nifty in 1969. The district court concluded that the alleged contract was unenforceable, and notice was therefore unnecessary, because under the then-applicable New York Statute of Frauds,*fn2 Sections 31 and 85 of the New York Personal Property Law, Nifty had failed to present sufficient written evidence of the contract. We conclude that the alleged contract was invalid under Section 31(1). By its terms the alleged contract could not have been performed within one year, and Nifty failed to present a writing satisfying the requirements of the section.*fn3
A contract with a termination provision can be performed within one year if there is a possibility, however slight, that the termination can be unilaterally effected within one year. North Shore Bottling Co. v. C. Schmidt & Sons, 22 N.Y.2d 171, 292 N.Y.S.2d 86, 239 N.E.2d 189 (1968). A termination provision must be express, however, in order to excuse a contract from the writing requirement of the Statute of Frauds. Hausen v. Academy Printing & Specialty Co., 34 A.D.2d 792, 311 N.Y.S.2d 613 (2d Dept. 1970); see also Cohen v. Bartgis Bros., 264 App.Div. 260, 35 N.Y.S.2d 206 (1st Dept. 1942). Nifty concedes that the termination provision here was only implied. The alleged contract could no more be performed within one year, therefore, than could a requirements contract without a termination provision. See Shirley Polykoff Advertising, Inc. v. Houbigant, 43 N.Y.2d 921, 403 N.Y.S.2d 732, 374 N.E.2d 625 (1978). Hence Nifty was required under Section 31(1) to present a writing evidencing the contract and "subscribed by the party to be charged therewith." At the time of the making of the alleged agreement, New York law also required that a writing purporting to evidence a contract for the sale of goods contain all the terms of the contract. Poel v. Brunswick Balke-Collender Co., 216 N.Y. 310, 314, 110 N.E. 619 (1915).
Nowhere in the large file of correspondence which Nifty claims contains a memorandum of the contract is there a writing which meets these requirements. In particular, A&P did not sign the two letters which Nifty specifically cited as evidence of "the fact of agreement and many of the terms alleged." In short, Nifty presented no significant evidence that it entered into a long-term contract with A&P.
Count II asserts that A&P and Nifty developed a "confidential relationship" and that "Pet maliciously interfered with the agreement between Nifty and A&P and induced and caused A&P to breach the same by summarily terminating Nifty," which on its face seems to allege nothing more than inducement by Pet of breach of a contract which the district court correctly held to be unenforceable. If we give Nifty the benefit of every inference, however, Count II might also be read to charge that A&P violated a duty of care arising from an alleged non-contractual, confidential relationship with Nifty, and that Pet interfered with this relationship.
To the extent that Count II alleges that Pet tortiously interfered with the alleged contract between A&P and Nifty, it was correctly dismissed. An essential element of the tort of inducement of breach of contract is the existence of a valid contract. See, e.g., Israel v. Wood Dolson Co., 1 N.Y.2d 116, 120, 151 N.Y.S.2d 1, 5, 134 N.E.2d 97, 99 (1956); Wegman v. Dairylea Cooperative, Inc., 50 A.D.2d 108, 114, 376 N.Y.S.2d 728, 736 (4th Dept. 1975); Red Wing Productions, Inc. v. American Broadcasting-Paramount Theatres, Inc., 213 N.Y.S.2d 315, 317 (Sup.Ct.N.Y.Co.1961). The contract here was unenforceable under the Statute of Frauds. Under New York law, a contract void under the Statute of Frauds was void for all purposes, including claims against third persons. Dung v. Parker, 52 N.Y. 494 (1873). This rule may have been relaxed to some degree.*fn4 Here, however, the existence of a valid contract is an explicit element of the cause of action. The plaintiff cannot rest his claim on a contract void under the Statute of Frauds, particularly where the term allegedly breached was only implied.*fn5
To the extent that Count II alleges that Pet interfered with Nifty's "confidential relationship" with A&P, it was also correctly dismissed. The only relevant tort recognized under New York law is interference with advantageous business relations. See generally, Beardsley v. Kilmer, 236 N.Y. 80, 140 N.E. 203 (1923). This tort requires proof that the defendant's sole motive was to inflict injury and that the defendant employed unlawful means to do so. Beardsley, supra, 236 N.Y. at 86-89, 140 N.E. 203; Rosenberg v. Del-Mar Division, Champion International Corp., 56 A.D.2d 576, 577, 391 N.Y.S.2d 452, 453 (2d Dept. 1977).
Pet was clearly acting in its interest as a seller of frozen waffles in attempting to become A&P's supplier. It was not motivated solely by a desire to inflict injury. Moreover, Nifty presented no evidence that Pet employed unlawful means in soliciting and acquiring the A&P business. Under New York law, "unlawful means" refers only to criminal or fraudulent conduct. Union Car Advertising Co. v. Collier, 263 N.Y. 386, 400, 189 N.E. 463, 469 (1934) ("(T)he interference of a competitor creates no cause of action. The thing the law looks for and seeks to redress when found is fraud, deceit, false charges made against the competitor"); see also Sommer v. Kaufman, 59 A.D.2d 843, 399 N.Y.S.2d 7 (1st Dept. 1977) (cause of action stated for interference with business relations where defendant allegedly bribed government officials).
To the extent that Count II charges A&P with violating a duty of care arising from a confidential relationship, it was also properly dismissed. The relationship of a buyer to his supplier, even if that buyer accounts for the large part of the supplier's business, does not constitute a fiduciary or other special relationship of trust imposing non-contractual duties on the buyer to continue buying goods or to give the supplier reasonable notice of termination. See, e.g., Sachs v. Cluett, Peabody & Co., 265 App.Div. 497, 39 N.Y.S.2d 853 (1st Dept. 1943), aff'd per curiam, 291 N.Y. 772, 53 N.E.2d 241 (1944). Nifty was not the ward of A&P; A&P had no duty to insure Nifty's continuing prosperity.*fn6 "Parties dealing at arm's length, each seeking for himself the best advantage to be derived from a transaction, are not in confidential relationship." Sachs, supra, 39 N.Y.S.2d at 856.*fn7
Count III of the complaint charges that "Pet and A&P maliciously and wilfully interfered with the contract between Nifty and Brown and induced Brown to breach the contract." Count III was correctly dismissed; Brown did not breach its alleged contract with Nifty.
In his deposition, a Brown employee testified that Brown would order carton board when it received an order from Nifty, but would not sheet, print, and die cut the board until a fifty percent advance payment was received. The board took three or four weeks to arrive.
Nifty never made the advance payment on the July order. As of August 22, the date of the A&P and Pet phone calls, the board was still in transit. Brown kept the board in inventory ("sat on the board") for eight or nine weeks before using it to fill other orders. A letter from Brown to Nifty dated October 20, 1969 describes the board as no longer in inventory.
The uncontroverted evidence shows that Brown held the board for Nifty long after it received the phone calls from A&P and Pet on August 22. Moreover, Brown stated point blank that neither Pet nor A&P influenced it to cancel the carton contract.
Proof of breach is an essential element of inducement of breach. Israel v. Wood Dolson Co., supra, 1 N.Y.2d at 120, 151 N.Y.S.2d 1, 134 N.E.2d 97. The breach induced cannot be that of the plaintiff himself. Brown did not breach the contract by using the board for other purposes, because Nifty never performed the condition precedent to the printing of the cartons: payment of the first fifty percent of the purchase price. The only "inducement" which took place, if any, was A&P's inducement of Nifty not to print any additional cartons.*fn8
Nifty presented no evidence to support an anticipatory repudiation by Brown. See N.Y.U.C.C. § 2-610 (McKinney 1964) and Official Comments; see also In re R. Hoe & Co., Inc., 508 F.2d 1126 (2d Cir. 1974). There is no evidence that Nifty demanded the cartons, or that Brown said it would not supply cartons upon receipt of the advance payment.*fn9
In Counts IV and V, Nifty contends that Pet monopolized a putative private label frozen waffle submarket and attempted to monopolize the entire frozen waffle market.*fn10 Counts IV and V also charge that Pet and A&P conspired to monopolize both markets, and to drive Nifty out of business, in violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2 (1976).
Summary judgment for the defendants can be sustained in this case if this court "is satisfied that a properly instructed jury, giving full weight to plaintiff's evidence, drawing every reasonable inference in its favor and subjecting defendant's evidence to a critical eye could not rationally have found that plaintiff was entitled to any relief." Ambook Enterprises v. Time, Inc., 612 F.2d 604, 611, (2d Cir. 1979); see also United States v. Diebold, 369 U.S. 654, 655, 82 S. Ct. 993, 994, 8 L. Ed. 2d 176 (1972) (per curiam). Because Pet and A&P have presented evidence contradicting Nifty's allegations, Nifty cannot rest on its pleadings, and must present some significant probative evidence in support of its complaint. Fed.R.Civ.P. 56(e); First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 288-89, 88 S. Ct. 1575, 1592, 20 L. Ed. 2d 569 (1968). This Nifty has failed to do.
A. The Relevant Product Market
Proof of the relevant product market is a necessary element of a cause of action for monopolization or attempted monopolization. United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S. Ct. 1698, 1704, 16 L. Ed. 2d 778 (1966); FLM Collision Parts, Inc. v. Ford Motor Co., 543 F.2d 1019, 1030 (2d Cir. 1976), cert. denied, 429 U.S. 1097, 97 S. Ct. 1116, 51 L. Ed. 2d 545 (1977). Nifty bears the burden of proving the boundaries of the relevant market. United States v. E. I. Du Pont de Nemours & Co., 351 U.S. 377, 381, 76 S. Ct. 994, 999, 100 L. Ed. 1264 (1956).
Goods are in the same relevant product market if they are "reasonably interchangeable for the purposes for which they are produced price, use and qualities considered." United States v. E. I. Du Pont de Nemours, supra, 351 U.S. at 404, 76 S. Ct. at 1012 (product market determined to be not only cellophane, but all flexible packaging materials).
Nifty concedes that there is no qualitative difference between brand name waffles and private label waffles. It is undisputed that Nifty and Pet each manufactured its private label waffles in the same plant, from the same formula, and by the same process as its brand name waffles. Nifty claims that two relevant submarkets are created by virtue of the higher cost of brand name waffles.*fn11
In Brown Shoe Co. v. United States, 370 U.S. 294, 325-26, 82 S. Ct. 1502, 1524, 8 L. Ed. 2d 510 (1962), the government challenged a proposed merger*fn12 between Brown Shoe and another shoe company on the grounds that it would create a risk of monopolization and adversely affect competition. Brown Shoe contended that the two companies competed in different product markets: medium-priced shoes and low-priced shoes. The Court rejected this argument, holding that the district court had properly found that the division of product lines based on "price/quality" was "unrealistic." Id. at 326, 82 S. Ct. at 1524. It is even less realistic to make such division in this case, where the two types of waffles are sold side by side in the same frozen food cases and distinguished only by label and price, and not quality.*fn13
Nifty's claims of monopolization therefore must be based on a product market that includes both private label and brand name frozen waffles. As such, the claims were correctly dismissed. When Pet began supplying A&P with private label waffles, Pet's share of the market was 48.3%. Its share declined continuously thereafter, and by 1974 was only 33%. These estimates of market share are not sufficient evidence to make out a claim of unlawful monopolization. See, e.g., United States v. Aluminum Company of America, 148 F.2d 416, 424 (2d Cir. 1945); United States v. United Shoe Machinery Corp., 110 F. Supp. 295, 346 (D.Mass.1953), aff'd per curiam, 347 U.S. 521, 74 S. Ct. 699, 98 L. Ed. 910 (1954).
B. Attempted Monopolization
The essential elements of attempted monopolization under Section 2 of the Sherman Act are (1) a "dangerous probability of success" in monopolizing a given product market and (2) a specific intent to "destroy competition or build monopoly." Times-Picayune Publishing Co. v. United States, 345 U.S. 594, 626, 73 S. Ct. 872, 890, 97 L. Ed. 1277 (1953); Lorain Journal Co. v. United States, 342 U.S. 143, 153, 72 S. Ct. 181, 186, 96 L. Ed. 162 (1951); FLM Collision Parts, Inc. v. Ford Motor Co., supra, 543 F.2d at 1030. Because we hold that Nifty failed to establish a "dangerous probability of success" as a matter of law, we need not consider the question of Pet's intent.
Pet's market share figures are the only evidence Nifty puts forward in support of its claim that Pet had such a dangerous probability of success. No reasonable jury could conclude from the rapid and continuous decline of Pet's market share, which reached a high point of 54.5% in March 1969 and fell to 33% by 1974, that there was a probability that Pet would monopolize the waffle market, let alone a dangerous probability. See United States v. Empire Gas Corp., 537 F.2d 296, 305-07 (8th Cir. 1976), cert. denied, 429 U.S. 1122, 97 S. Ct. 1158, 51 L. Ed. 2d 572 (1977) (proof of 50% market share alone is not sufficient to show a dangerous probability of success); Diamond International Corp. v. Walterhoefer, 289 F. Supp. 550, 578 (D.Md.1968); see also Buffalo Courier-Express, Inc. v. Buffalo Evening News, Inc., 601 F.2d 48, 60 (2d Cir. 1979).
Counts IV and V also allege a conspiracy between Pet and A&P in violation of the Sherman Act, specifically, that A&P and Pet conspired to bring about Nifty's alleged "abrupt termination without notice," and that Pet made a discriminatory offer to A&P in order to obtain the private label account. Nifty asserts that A&P and Pet jointly interfered in Nifty's contract for cartons with the Brown Company, and that this was evidence of "knowing collusion" between the defendants.
The undisputed facts, however, show only that A&P, acting alone and with ample justification based on continued problems with the quality of Nifty's waffles, decided to replace Nifty with Pet as its supplier of "Sunnyfield" waffles. A termination of this type is not a per se violation of the antitrust laws; the fact that an agreement between the buyer and the new supplier is necessarily involved does not make it an illegal conspiracy. United States v. Colgate, 250 U.S. 300, 39 S. Ct. 465, 63 L. Ed. 992 (1919); Fuchs Sugars & Syrups v. Amstar Corp., 602 F.2d 1025 (2d Cir. 1979); Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke and Liquors, Ltd., 416 F.2d 71, 78 (9th Cir. 1969).*fn14 This is as true of refusal to deal with sellers by buyers as it is of buyers by sellers. See Pastor v. American Telephone & Telegraph Co., 76 F. Supp. 781 (S.D.N.Y.1940).
Nifty presented no significant probative evidence to controvert Pet's sworn statements and other evidence that it did not offer waffles to A&P on discriminatory or predatory terms*fn15 and that it neither suggested nor was involved in the termination of Nifty. The calls by Pet and A&P to Brown to inquire about the status of Nifty's carton order were made pursuant to a lawful change in suppliers, and are not significant probative evidence of a conspiracy to violate the antitrust laws.
Even if Nifty was injured by its termination, this alone does not convert A& P's decision into a violation of the antitrust laws. See Oreck Corp. v. Whirlpool Corp., 579 F.2d 126 (2d Cir. 1978) (en banc), cert. denied, 439 U.S. 946, 99 S. Ct. 340, 58 L. Ed. 2d 338, reh. denied, 439 U.S. 1104, 99 S. Ct. 883, 59 L. Ed. 2d 65 (1978).
Counts VI and VII incorporate and reallege parts of Counts IV and V as a common law tort of unfair competition. Nifty has not stated a cause of action for unfair competition under New York law, and these counts were properly dismissed by the district court.
Claims for unfair competition in New York have traditionally involved passing off or malicious and fraudulent interference with good will. See, e.g., David B. Findlay, Inc. v. Findlay, 18 N.Y.2d 12, 271 N.Y.S.2d 652, 218 N.E.2d 531, cert. denied, 385 U.S. 930, 87 S. Ct. 289, 17 L. Ed. 2d 212 (1966). The tort originated as a supplement to the tort of trademark infringement. See Allied Maintenance Corp. v. Allied Mechanical Trades, Inc., 42 N.Y.2d 538, 399 N.Y.S.2d 628, 369 N.E.2d 1162 (1977). Although New York courts have not entirely restricted unfair competition to cases of passing off, the allegations of Counts IV and V have never formed the basis of such a tort. None of the New York cases cited by Nifty involves conduct even remotely similar to the conduct of the parties here.*fn16
The judgment dismissing the action is affirmed.