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NEWPORT TIRE & RUBBER CO. v. TIRE & BATTERY CORP.

October 6, 1980

NEWPORT TIRE & RUBBER CO., INC., Plaintiff,
v.
The TIRE & BATTERY CORPORATION, Defendant



The opinion of the court was delivered by: BRAMWELL

DECISION AND ORDER

After the twelve-year relationship between the plaintiff Newport Tire & Rubber Co. *fn1" and the defendant The Tire and Battery Corporation *fn2" had become severely strained, *fn3" the defendant's Board of Directors decided to terminate the plaintiff as a distributor of Multi-Mile tires, a private brand tire marketed by the defendant. *fn4" The plaintiff's reaction to the defendant's decision has taken the form of the instant motion for a preliminary injunction that, if granted, would have the effect of forestalling the proposed termination, at least until the trial of this case. Pursuant to Rule 52(a) of the Federal Rules of Civil Procedure, the Court will assess the plaintiff's motion in the form of Findings of Fact and Conclusions of Law.

 FINDINGS OF FACT

 A. The Parties

 1. The plaintiff Newport Tire and Rubber Co. Inc. (hereinafter referred to as "Newport") is a New York corporation whose principal place of business is located at 333 Hempstead Avenue, Malverne, New York (88).*

 2. The defendant The Tire and Battery Corporation (hereinafter referred to as "TBC") is a Delaware Corporation whose principal place of business is situated in Memphis, Tennessee. Complaint P 1.

 B. The Tire Industry and the Private Brand Tire

 3. A "private brand tire," the subject of this action, is created from molds that are owned by a marketer; a major manufacturer actually produces the tires (33; see generally Def. Ex. 126).**

 4. A wholesale distributor then channels the private brand tires to local retail dealers (194).

 5. Private brand tires are sold at lower prices than "name brand tires" (195).

 6. Little brand loyalty exists among dealers and ultimate customers with respect to private brand tires (201).

 7. Price is the most important sales characteristic of the private brand tire (200, 206, 400, 775, 784).

 8. Since low prices derive from high volume, a successful private brand tire marketer must insist on such volume from its distributors (210, 775, 784).

 9. Although useful for success in the distribution of private brand tires, positive personal relationships between a distributor and a dealer are of secondary import to the maintenance of a competitive private brand tire price (400, 785).

 10. Private brand tire dealers demand same day delivery from their distributors (205, 402, 788); the effect of delinquent delivery is lost sales (405).

 11. The tire industry presently is in a chaotic state, brimming with tight competitive margins and with a surplus of available tires (171, 201, 207, 245, 793).

 12. The depressed tire market has caused extensive private brand switching among distributors and dealers in recent years (203).

 C. The Plaintiff's Business Structure

 13. The plaintiff is a wholesale distributor of private brand tires, tubes and batteries (29).

 14. Newport services between 300 and 350 local tire dealers (352, Pl. Ex. 68, 69).***

 15. Hyman Kaufman formed Newport in 1960. Mr. Kaufman is the chairman, president and sole shareholder of Newport (28).

 16. Newport employs four salesmen (88) in a sales program coordinated by Ken Kaufman, Hyman Kaufman's son (73, 296). *fn5"

 17. Newport's sales program also includes the implementation of mailings (569, Pl. Ex. 65, 66) to potential customers identified by Dun & Bradstreet printouts (75, Pl. Ex. 25, 28, 29, 67), the placement of advertisements (73, Pl. Ex. 22-24, 27) and the prodigious use of the telephone (83, Pl. Ex. 30).

 18. One Newport salesman covers Vermont, Connecticut, New Hampshire, Maine and Rhode Island; another covers New York State and Pennsylvania; the third is responsible for New Jersey, Massachusetts and Rhode Island; the territory of the final Newport salesman entails northern New Jersey (99, 567, 597, 622). Hyman Kaufman closely reviews the performance of these salesmen (82, Pl. Ex. 28, 29).

 19. Newport utilizes a 37,000 square foot warehouse that is located in West Hempstead, New York (89, 90, 298). Eight warehousemen staff this facility that houses approximately 35,000 tires (605).

 20. Newport also employs seven office and mail workers and four truck drivers (88, 96; see also Pl. Ex. 32, 36, 37).

 21. Newport has a large line of credit with the Bank of North America at 1/4 above prime (100, 101, Pl. Ex. 38, 61, 62).

 22. A compelling reason for this favorable position with the Bank of North America is Mr. Kaufman's outstanding background and reputation (146).

 23. In 1970, Newport received net income from the sale of tires in the amount of $ 204,000; by 1979, this figure had dropped to $ 24,000 *fn6" (1015, 1019, Def. Ex. 4, 5, 8-18).

 24. As measured by stockholder equity, the net worth of Newport is $ 750,000 (293).

 D. The Defendant's Business Structure

 25. The defendant is a private tire brand buying cooperative made up of tire distributors and auto chain store owners (765).

 26. The members of TBC own the cooperative and run it by selecting its suppliers and lines; eight such members comprise TBC's Board of Directors (769, 774).

 27. In 1968, TBC's predecessor, Cordovan Associates, Inc., created the Multi-Mile private brand tire in order to increase both its sales volume and its national domestic tire market penetration (45, 766, 768).

 28. Multi-Mile is produced by subsidiaries of Goodyear Tire & Rubber Company (46-48, 196). *fn ...


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