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May 24, 1991


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 Cir. 1957).

For the reasons stated below, defendant's motion is granted.


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 fluorescent bulbs 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, 914).

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. (Tr. 1557).

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. 1725).

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 Exh. 86).

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 relationship.

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).

The security agreement between Philips and Energex specifically provides that "[n]o oral agreement, guarantee, promise, representation or warranty shall be binding." Philips entered into these agreements because Energex was a very large customer of their fluorescent bulbs and had an outstanding debt to Philips. (Tr. 666). Furthermore, Philips received a security interest in Energex's equipment. Philips was specifically a party to the security agreement (Plaintiff Exh. 87) and an agreement which released Energex from certain debts. (Plaintiff Exh. 86). None of these agreements mentioned any of the oral promises which Caravetta claims were made by Tumminello. Mr. Caravetta claims, however, that he accepted the return of Energex only because of these oral promises. (Tr. 1772).

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. 1078).

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 ...

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