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Shop & Save Food Markets Inc. v. Pneumo Corp.

January 20, 1982


Author: Palmieri

Before: FEINBERG, MESKILL, Circuit Judges, and PALMIERI, District Judge.*fn*

PALMIERI, D.J.: The plaintiff Shop & Save, a Vermont corporation, operates retail grocery stores in St. Johnsbury, Derby and Lyndonville, Vermont.The defendant Pneumo Dynamics Corporation (Pneumo), a Delaware corporation, owns or controls the other defendants: P & C Food Markets, Inc. (P & C), a New York corporation operating a chain of retail grocery stores in Vermont and elsewhere; Cross Company, a wholesale grocery distributor acquired by Pneumo in 1972; and Abbott Realty Company (Abbott), a Vermont Corporation that manages property on behalf of Pneumo, which was acquired with Cross in 1972.

Prior to the events giving rise to the instant controversy, plaintiff purchased substantially all of its groceries from Cross. It had also been a month-to-month sublessee of the property where it operates its Lyndonville grocery store from 1970 to 1977, paying a rental of $20,000 per year. The principal lessee was and is Abbott Realty, whose assets were transferred to P & C by Pneumo in 1977.

In July 1976 plaintiff sought from defendants a long-term sublease with renewal options. At the same time, it began to purchase a portion of its wholesale groceries from a competitor of Cross. Prolonged negotiations ensued until, ten months later in May 1977, a long-term sublease was agreed to at $31,500 per year plus 1.5 per cent of plaintiff's annual sales above $1,500,000.

At the initial stages of negotiations, Pneumo informed plaintiff that it would not offer a lengthy sublease at the month-to-month rate because that figure did not reflect current market value and it feared that the loss of plaintiff's wholesale purchases from Cross would diminish the total value of its relationship with plaintiff in Lyndonville. It also became clear from the correspondence between the parties that Pneumo's subsidiary P & C would be opening a competing retail grocery store in Lyndonville.

When plaintiff indicated that it did not wish to commit itself to purchases from Cross, Pneumo responded with an offer of a long-term sublease at the terms finally agreed to in May 1977. Prior to this final agreement, however, several offers and counteroffers were considered and may have been operated under for a short period of time. Among these was an offer by Pneumo that rent vary from $20,000 to $31,500 per year according to the amount of groceries purchased from Cross. Plaintiff found the rent formula acceptable ("we have no alternative but to accept") but was not satisfied with the lease terms and renewal options offered by Pneumo. Subsequently, Pneumo revoked its variable rent offer, and reiterated its flat rent offer upon which terms the parties finally agreed.

Issues Presented

Appellant claims that the district court erred in granting summary judgment for defendants on the two section 1 Sherman Act violations it alleged: (1) a group boycott or concerted refusal to deal; and (2) a tying arrangement.*fn1

Summary judgment is useful as a "procedural weapon to pierce sham claims and resolve actions where the facts are undisputed. "American Manufacturers Mutual Insurance Co. v. American Broadcasting-Paramount Theatres, Inc., 388 F.2d 272, 278 (2d Cir. 1967); aff'g district court on remand, 446 F.2d 1131 (2d Cir. 1971), cert. denied, 404 U.S. 1063 (1972). It is often, however, "too blunt a weapon with which to win the day, particularly where... complicated issues of fact must be resolved in order to deal adequately with difficult questions of law which remain in the case." Miller v. General Outdoor Advertising Co., 337 F.2d 944, 948 (2d Cir. 1964). This is particularly true in the case of antitrust litigation, see Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473 (1962), although in the proper case summary judgment may be granted, see Capital Temporaries, Inc. v. Olsten Corp., 506 F.2d 658, 667 (2d Cir. 1974); Coniglio v. Highwood Services, Inc., 495 F.2d 1286, 1292-93 (2d Cir.), cert. denied, 419 U.S. 1022 (1974). Whether or not a material fact is in dispute, so as to preclude summary judgment, is a "matter of informed and properly reasoned judgment" as the law provides "no magical talisman or compass [to] serve as an unerring guide" in this determination. American Manufacturers Mutual Insurance Co., supra at 279. If a material issue of fact does exist, the court may not grant summary judgment unless, assuming all facts alleged by plaintiff, and the reasonable inferences to be drawn thereupon, to be true, it finds that the law does not recognize plaintiff's claim for relief.

We are satisfied that Judge Coffrin's thorough opinion properly applied the above standards to the claims before him on the issue of a group boycott or concerted refusal to deal. We must reverse and remand, however, on the issue of whether an illegal "tying arrangement" existed since we believe the grant of summary judgment by the lower court was premised on a too limited view of the types of acts which may satisfy the "tying" element of this section 1 violation.


The Supreme Court has defined an illegal tying arrangement as "an agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that product from any other supplier." Northern Pacific Railway Co. v. United States, 356 U.S. 1, 5-6 (1958). A tying arrangement will be per se illegal, and thus prohibited without proof of unreasonable anti-competitive effect, if in addition to a "tie" of two distinct products it is demonstrated that: defendants possess sufficient economic power in the tying market to coerce the purchase of the tied product; actual coercion to purchase the tied product was employed; anticompetitive effects result in the tied market; and a noninsubstantial amount of interstate commerce is involved in the tied market. Fortner Enterprises, Inc. v. United States Steel Corp., 394 U.S. 495 (1969); United States v. Loew's Inc., 371 U.S. 38 (1962); Northern Pacific Railway Co., supra; Times-Picayune Publishing Co. v. United States, 345 U.S. 594 (1953); International Salt Co., Inc. v. United States, 332 U.S. 392 (1947); Yentsch v. Texaco, Inc., 630 F.2d 46, 56-57 (2d Cir. 1980); Hill v. A-T-O, Inc., 535 F.2d 1349, 1352-55 (2d Cir. 1976); Capital Temporaries, Inc. v. Olsten Corp., 506 F.2d 658, 661-63 (2d Cir. 1974); Coniglio, supra, at 1289.

As stated in Northern Pacific Railway Co., supra, at 6:

Where [tying] conditions are successfully exacted competition on the merits with respect to the tied product is inevitably curbed. Indeed "tying agreements serve hardly any purpose beyond the suppression of competition." Standard Oil Co. of California v. United States, 337 U.S. 293, 305-306. They deny competitors free access to the market for the tied product, not because the party imposing the tying requirements has a better product or a lower price but because of his power or leverage in ...

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