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ROSEN v. HYUNDAI GROUP

August 10, 1993

JOSEPH ROSEN and SANDRA McNEIL, Plaintiffs,
v.
HYUNDAI GROUP (KOREA), HYUNDAI CORPORATION and HYUNDAI PIANO; SAMICK (KOREA), SAMICK (AMERICA) and SAMICK MUSIC CORP., Defendants.



The opinion of the court was delivered by: LEONARD D. WEXLER

 (Wexler, J.)

 Joseph Rosen, Sandra McNeil, Family Melody Center of Patchogue, Inc. and Schumann International Inc., (collectively "plaintiffs") distributed the Schumann brand piano manufactured by defendant Samick Musical Instruments Corporation ("SMIC") and sold to them by defendant Hyundai Corporation ("Hyundai") who acted as a middleman for plaintiffs and SMIC. Plaintiffs brought a slew of antitrust and state law claims stemming from their termination as a distributor of SMIC-manufactured pianos. Presently before the Court is defendants' motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the reasons stated below, defendants' motion for summary judgment with respect to plaintiffs' antitrust claims is granted. Additionally, summary judgment is also granted with respect to all state claims except plaintiffs' breach of warranty claim.

 I. BACKGROUND

 Plaintiffs were involved in the wholesale distribution of pianos to dealers located in the United States. SMIC is a Korean Corporation that manufactures pianos. *fn1" Defendant Samick (USA) is a California corporation whose principal business is the wholesale distribution of SMIC-manufactured pianos under the trade name Samick. SMIC owns 80% of the shares of Samick (USA). The remaining 20% is owned by Kyo Chu, who is the president of Samick (USA) and one of the managing directors of SMIC. *fn2"

 Hyundai is a large-scale Korean trading company. Defendant Hyundai (USA) is a wholly-owned subsidiary of the Hyundai Corporation that accepts orders from Hyundai's customers in the United States as well as parts of Latin and South America. *fn3" From approximately 1979 until 1990, Hyundai acted as a middleman for plaintiffs and SMIC, purchasing SMIC-manufactured pianos under the trade name Schumann and reselling them to plaintiffs. Plaintiffs never entered into a written contract with Hyundai nor did plaintiffs have any contract with SMIC for a continuous supply of Schumann pianos. Indeed, plaintiffs had no direct dealings with SMIC whatsoever. In addition to its role as a middleman, Hyundai also purchased pianos from SMIC under the trade name Hyundai and distributed these pianos directly in the United States wholesale market.

 The relationship between SMIC and plaintiffs was rocky from the outset. SMIC constantly threatened to terminate plaintiffs' supply of Schumann brand pianos and towards the end of the relationship broadcast its intent to terminate plaintiffs to dealers in the trade. It also appears that Hyundai attempted to convince SMIC on many occasions not to terminate plaintiffs, apparently because it was in Hyundai's economic interest to continue acting as a middleman for SMIC and plaintiffs. *fn4" Additionally, plaintiffs also allege that large quantities of pianos were purposefully delivered in defective condition and that defendants failed to cure the defects.

 In their complaint, plaintiffs allege that SMIC, Samick (USA), Hyundai and Hyundai (USA) entered into an agreement to terminate plaintiffs as distributors of the SMIC-manufactured Schumann brand piano because plaintiffs refused to lower their prices. SMIC contends that it unilaterally decided to terminate plaintiffs as part of its overall sales strategy. It claims that plaintiffs sold the Schumann pianos cheaply and as a result failed to provide its customers with any after-sales services. According to SMIC, people in the trade were aware that SMIC manufactured the Schumann brand pianos and SMIC was concerned that the reputation of its pianos would be injured as a result of plaintiffs' discounting.

 Plaintiffs, on the other hand, claim that SMIC terminated them as distributors because of pressure placed upon it by Hyundai. Plaintiffs speculate that Hyundai, who competed against plaintiffs at the distributor level, pressured SMIC to terminate plaintiffs because plaintiffs refused to lower their prices. Plaintiffs suggest that Hyundai exercised control over SMIC because of its position as one of SMIC's largest customers. Plaintiffs further contend that Samick (USA) was also in favor of their termination because it too competed against plaintiffs at the distributor level.

 II. DISCUSSION

 A. Federal Antitrust Claims

 1. Section 1 Claims Vertical Price-Fixing Claim

 Plaintiffs allege that the Hyundai defendants entered into an illicit price-fixing agreement with the Samick defendants in violation of ยง 1 of the Sherman Antitrust Act. *fn5" Vertical price-fixing schemes are considered per se illegal under the antitrust laws. See Business Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 724, 99 L. Ed. 2d 808, 108 S. Ct. 1515 (1988). In order to succeed on the merits of their claim, plaintiffs need only prove that the Hyundai defendants on the one hand and the Samick defendants on the other hand entered into an agreement to fix prices. *fn6" Because vertical price-fixing is a per se violation of the antitrust laws, plaintiffs do ...


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