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ENERGEX LIGHTING v. N. A. PHILIPS LIGHTING
May 24, 1991
ENERGEX LIGHTING INDUSTRIES, INC., PLAINTIFF,
NORTH AMERICAN PHILIPS LIGHTING CORPORATION, ET AL., DEFENDANTS.
The opinion of the court was delivered by: Motley, District Judge.
After plaintiff presented its case to this court, defendant
moved for a dismissal of the case under Fed.R.Civ.P. 41(b). In
ruling on a Rule 41(b) motion, it is the duty of this court to
"take an unbiased view of all the evidence, direct and
circumstantial, and accord it such weight as the court believes
it is entitled to receive." Furth v. Inc. Pub. Co.,
823 F.2d 1178, 1179 (7th Cir. 1987) (quoting Sanders v. General Services
Administration, 707 F.2d 969, 971 (7th Cir. 1983)).
Fed.R.Civ.P. 41(b) directs the court not to make any
"inferences in the plaintiff's favor but rather [to] weigh all
the evidence and decide where the preponderance lies." Id. See
also Hersch v. United States, 719 F.2d 873, 876 (6th Cir. 1983)
(under Rule 41(b), it is the duty of the court to weigh the
evidence and no special inferences in favor of plaintiff should
be made); Bertolino v. Italian Line, 414 F. Supp. 279, 285
(S.D.N.Y. 1976) (same); White v. Jaegerman, 391 F. Supp. 438,
439 (S.D.N.Y. 1975) (under 41(b) the "court has power to decide
the case on the merits and, unlike a jury case, need not
consider plaintiff's evidence in a light most favorable to
plaintiff"). Furthermore even if plaintiff had made out a prima
facie case which would withstand a motion for a directed
verdict, this court may still dismiss the case under Rule
41(b). Huber v. American President Lines, 240 F.2d 778, 779 (2d
For the reasons stated below, defendant's motion is granted.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Pursuant to Fed.R.Civ.P. 52, the court makes the following
findings of fact and conclusions of law:
This case involves what plaintiff has called the guaranteed
lamp market. This market consists of both fluorescent bulbs and
incandescent long life bulbs. (Tr. 922). The incandescent bulbs
are long lasting bulbs that burn for a longer period of time
than regular incandescent bulbs. Their rated life is a couple
of thousand hours. (Tr. 149, 821). These bulbs have a number of
unique characteristics such as the construction of their
filament and base. (Tr. 148-149, 2225). The fluorescent bulbs
sold in this market are exactly the same as any other
fluorescent bulb and possess no unique characteristics. (Tr.
151, 822-823, 1114; Stip. 26). They generally have a rated life
of approximately 24,000 hours. (Tr. 821).
Both the fluorescent and incandescent bulbs, in the long life
market, are sold with a guarantee by the distributor that they
will last a specified number of months. (Tr. 84, 151, 922). If
they do not last, they are replaced free of charge. (Tr. 148).
These guaranteed bulbs sell at a price of four to seven times
the price of ordinary bulbs. (Plaintiff's Exh. 115, Tr. 922).
Testimony was elicited from Mr. Howell, the president of
Energex, which demonstrated that the guarantee on the
had little economic value because the rate at which these bulbs
burned out, before the guarantee expired, was under ten
percent. (Tr. 1351-1352). Thus it is more efficient to purchase
fluorescent bulbs without the guarantee. Dr. Levenson,
plaintiff's expert witness, believed that the same also held
true for incandescent bulbs. (Tr. 2225). Most guaranteed long
life bulbs are sold to industrial establishments such as banks,
schools, stores, warehouses and manufacturing plants. (Tr. 150,
During the relevant time period of 1978-1980, there were
eight companies that manufactured guaranteed long life lamps.
These companies were: Duro Test, Philips, Westinghouse,
Sylvania, Energex, Marvel, Solar and Penn Illuminating. Of
these, only Duro Test, Philips, Westinghouse and Sylvania
manufactured their own fluorescent bulbs for the guaranteed
long life market. (Plaintiff's Exh. 512.)
Barriers to entry in to the market are moderate. The
machinery needed to produce bulbs is quite expensive, but
actually obtaining it is not that difficult because used
equipment is available in this Country and new equipment is
manufactured overseas. (Tr. 144-145, 846-847, 892-893,
1792-1793). In addition to purchasing the machines, skilled
workers must be found to maintain the machines. (Tr. 145,
1793). However, there are no special patents involved in
manufacturing long life incandescent light bulbs. As already
stated, all fluorescent bulbs are the same, so any manufacturer
of fluorescent bulbs could enter the guaranteed long life
market. (Tr. 2340-2341). In addition, in 1980, two other firms
entered the guaranteed lamp market — Action Tungsram and
Angelo Brothers. (Plaintiff's Exhibit 77-IX). Another firm,
Supreme, also entered the market after the demise of Energex.
(Plaintiff's Exh. 513, Tr. 143, 1792). Thus the entry of these
firms shows that the market was not saturated and that
manufacturing equipment could be obtained.
Defendant Philips Lighting, a Delaware corporation, is a
manufacturer of light bulbs and other lighting products,
including long life lamps. (Stip. 7, 8). Guaranteed Service
Lighting Products (GSLP) was a division of Philips that sold
guaranteed long life lamps to distributors. (Stip. 13, 14).
Through its various divisions, Philips sells to both
distributors and directly to end users. Philips manufactured
both fluorescent and incandescent bulbs for the guaranteed long
life market. (Plaintiff's Exh. 512).
Plaintiff Energex, a New Jersey Corporation, manufactured
long-life incandescent bulbs. (Stip. 4). They, however,
purchased all of their fluorescent bulbs from Philips. (Stip.
5). Of the incandescent bulbs Energex sold, it purchased a
small amount from Philips. (Tr. 1217, 1218, 1221). In this
industry, it is necessary for a manufacturer to be able to sell
both incandescent and fluorescent bulbs to distributors;
otherwise distributors would go to a manufacturer that could
meet all of their lighting needs. (Tr. 1183, 1837, 2183). Mr.
Howell testified that Philips was the only manufacturer that
would supply Energex with fluorescent bulbs. Other
manufacturers refused to sell to Energex because Energex did
not possess sufficient purchasing power. (Tr. 1103). In 1978,
Energex was the largest customer of Philips-GSLP. (Tr. 855).
Thus Energex was a competitor of Philips but at the same time
depended upon Philips to supply it with fluorescent bulbs. In
the same vein, Philips was a competitor of Energex but Energex
was a very large customer of GSLP. (Tr. 632). Due to these
circumstances, Philips was in a position in which it could
"squeeze" Energex by selling Energex fluorescent bulbs for
resale at one price and selling the same product directly to
companies that were customers of Energex at the same or lower
prices. (Tr. 633).
Energex sold its lamps to distributors who then sold them to
industrial end users. (Stip. 4). Energex also sold a large
number of long life incandescent bulbs to Torch Lighting which
used telephone sales to sell directly to the home consumer.
John Howell served as President of Energex from July 1976
until the business ceased operation in 1980. (Stip. 24). Prior
to joining Energex, Howell had been the General Manager of
GSLP. (Tr. 77).
Numerous invoices (Plaintiff's Exh. 231, 232, 213, 222, 236,
237, et al.) show that, in 1979, Philips offered customers who
were distributors substantial discounts on some of its long
life lamps. These discounts were in excess of the stated
discounts on Philips' published price lists for the quantity of
the product being purchased. These invoices show that Philips
did not give Energex the same discount that other customers
enjoyed. (See e.g. Tr. 316, 318-321, 323, 325-328, 334-335,
337-339, 342, 369, 370-374, 378, 391). As a result, Energex
repeatedly paid more for various products purchased from
Philips than distributors were paying. (Id.)
Furthermore, on a number of occasions, Philips sold products
to distributors who were customers of Energex at or below the
price at which Energex was selling its products to these same
customers. (Tr. 925-926, 1022). In these instances Philips
deviated from its published price list in which the discount a
customer would receive was related to the quantity of goods
purchased. (Plaintiff Exh. 423; Tr. 869-871). There was
testimony from one distributor, Mr. Larsen, who was a customer
of Energex, that Philips offered him products at prices below
or at that being offered by Energex. (Tr. 1022). Mr. Larsen
testified that GSLP's general manager, Mr. Ricchiuti,
specifically offered to sell him light bulbs at prices below
that at which Energex sold the product. (Tr. 1022). He
testified that Mr. Richiutti asked him why he did business with
Energex because they were "not going to be around long" and
that Philips had the best prices and could take care of him.
(Tr. 1023, 1024). Mr. Larsen testified that, based upon these
conversations, it was his opinion that Philips was trying to
"put[ ] Energex out." (Tr. 1024). Because of the discounts
being offered by Philips, Larsen ceased purchasing from
Energex. (Tr. 1030).
During 1979, both Energex and M.E. suffered from financial
problems. Energex was behind in its payments to Philips and
M.E. was unable to make certain of its scheduled payments to
Caravetta and informed him of their inability to do so. (Tr.
1705, 1707). In the summer of 1979, Roger Fleck, the credit
manager at Philips contacted Mr. Caravetta and requested a
meeting to discuss the problems which Energex and M.E. were
experiencing. (Tr. 1708). Sometime in July, a meeting was held
between Mr. Caravetta, Mr. Howell, Mr. Tumminello and Mr.
Fleck. (Tr. 1717). Mr. Tumminello, from 1968-1984, was
President of the Lighting Division of North American Philips.
(Tr. 560, 612). At this meeting the possibility of Mr.
Caravetta taking back Energex was discussed along with possible
solutions to Energex's financial problems. (Tr. 1722-1724).
Caravetta claims that Tumminello stated that he would "protect"
Energex if Caravetta reacquired the company. (Tr. 1723). No
agreements, however, were finalized at this meeting. (Tr.
Following the July meeting, another meeting took place at
which, according to Caravetta, Tumminello told him in a private
conference that he would put an "umbrella" above Energex and
"protect" its line of customers. (Tr. 1728). Caravetta also
testified that Tumminello agreed that Energex would receive a
five percent greater discount than Philips' other customers. At
this meeting all of the participants discussed the manner in
which they would deal with Energex's creditors. (Tr. 1730).
After a number of telephone calls and letters (Plaintiff's Exh.
518, Tr. 1752), another meeting was held on September 26, 1980.
At this meeting the creditors agreed to a
number of proposals for restructuring the debt of Energex and
M.E. (Tr. 1757-1760).
Following this meeting, in which Mr. Tumminello did not
participate, Mr. Howell, Mr. Caravetta and Mr. Feinberg,
Caravetta's attorney, met with Mr. Tumminello in his office.
(Tr. 1760-1761, 2056-2057). Caravetta testified that he told
Tumminello that a number of agreements were reached concerning
creditors but that the deal depended upon Energex receiving a
65% discount, a 5% discount spread and that Philips would not
"offer better prices — that he would stick to his published
price list." (Tr. 1761). Caravetta testified that Mr.
Tumminello promised to honor these agreements. (Tr. 1763). Mr.
Feinberg, who was present at the meeting, could not remember
any of the specific terms which Caravetta and Tumminello
discussed (Tr. 2059) but did remember some discussion of a 5%
spread and Philips' agreement to adhere to published discount
lists. (Tr. 2060).
Mr. Tumminello, although not remembering details of the
particular meetings, did remember agreeing to a 65% discount.
(Tr. 676, 680-681). Tumminello, however, testified that if
there was any discussion of a 5% discount price differential,
he did not give it any significant thought because the 65%
discount which he agreed Energex would receive was five points
higher than what other customers received. (Tr. 677).
Tumminello also testified that there was no discussion
regarding a fluctuating spread which would change as other
customers' discounts changed. (Tr. 678). Although these
agreements were oral, there is a Philips memorandum, in
evidence, that documents that Energex was to receive a 65%
discount. (Plaintiff's Exh. 107).
Furthermore, Plaintiff's Exhibit 515 is a letter, dated
November 1982 from Mr. Feinberg to Philips' attorney. As
evidenced by the date, the letter was written over two years
after the September-October 1979 meetings took place. In this
letter, Mr. Feinberg states that there was an agreement that
Energex would receive a 65%, discount and a continual 5%
greater price discount than that being offered to distributors.
It further stated that Mr. Caravetta's reacquisition of Energex
depended upon such an agreement. It also discussed Energex
receiving a $250,000 credit line from Philips which both
parties agree Philips extended.
In October 1979, as a product of these negotiations, Energex
and its creditors signed a number of agreements. These
interrelated agreements are fully set forth in writing.
(Plaintiff's Exh. 84, 85, 86, 87, 506). The principal document
is an agreement among Energex, Caravetta, M.E. and four outside
creditors (Philips, GE, Sylvania and Corning) which
restructured the relationships among all those parties. The
agreement included details about the schedule of payments of
Energex's $342,000 in debts to the outside creditors by M.E.;
Energex's release of $180,000 of debts owed to it by M.E.; the
transfer of Energex's stock by M.E. to Caravetta; and
Caravetta's release of all obligations of M.E. (Plaintiff's
Two separate agreements also exist between Caravetta and M.E.
which relate to his reacquisition of Energex stock.
(Plaintiff's Exh. 85, 103). Plaintiff's Exhibit 84 sets forth
in detail the terms of M.E. and Energex's commercial
Finally, Energex agreed to give Philips a security interest,
subordinate to that of Finance America Capital Corp., in its
assets "to secure payment . . . of any and all present and
future indebtedness" of Energex to Philips. (Plaintiff's
Exhibit 87). A UCC filing implementing this security agreement
was also executed. (Plaintiff's Exhibit 150).
At about the same time that these written and oral agreements
were allegedly entered into, Philips introduced a "Fall
Harvest" promotion on one of its incandescent bulbs. This
promotion offered specific incandescent bulbs at twenty-three
or twenty-four cents. (Defendant's Exh. J-2, Tr. 1225). Energex
was offering the same bulbs at thirty-one cents. (Tr. 1226).
Philips ran further promotions in the Spring of 1980.
(Defendants Exh. J-1, 5). Although, Mr. Howell testified that
Mr. Tumminello did not mention the promotions in their
negotiations, Mr. Howell also testified that he and Caravetta
became aware of the "Fall Harvest" promotion before the written
agreements were signed. (Tr. 1075-1077). He testified that
these promotions had devastating effects on Energex. (Tr.
Although, Mr. Howell stated that he believed that these
promotions were run in order to drive Energex out of business
(Tr. 1226), Philips' internal documents show that these
promotions were directed at Marvel, another manufacturer of
guaranteed lamps, rather than Energex. Plaintiff's Exhibit
76-VI shows that Philips was concerned with Marvel's liberal
use of discounts in selling their product and Philips responded
with the promotions described above. (Tr. 1237-1283).
After October, 1979, Energex claims that the use of these
promotions violated the promised 5% discount differential and
that the promotions deviated from Philips' published price list
also in violation of the agreement. (Tr. 1606-1607). Plaintiff
points to Defendants' Exhibit J-2 and J-5 as evidence of the
above practices. Defendant's Exhibit J-2, as discussed above,
was Philips' promotion on an incandescent bulb called an A19.
This promotion ran from October 15, 1979 to December 14, 1979.
The A19 was not a product that plaintiff often bought from
defendant for resale but rather was the principal product
manufactured by Energex. (Tr. 434-35, 2381).
From March 3, 1980 to May 2, 1980, Philips ran a promotion on
fluorescent bulbs. (Defendant's Exh. J-5). Under this promotion
any customer who bought twelve cases of fluorescent bulbs would
then receive an additional case free. As plaintiff
demonstrated, it appears that when this free case is translated
into a dollar value, any order in excess of 31 cases may have
increased the customers discount to more than 65%. (Plaintiff's
Exh. 524). The promotion also appears to be a violation of
Philips' promise not to deviate from its published price list.
Furthermore, Philips did not ...