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VENZIE CORP. v. UNITED STATES MINERAL PRODS. CO.

July 31, 1974

THE VENZIE CORPORATION, and F.M. VENZIE & COMPANY, INC.
v.
UNITED STATES MINERAL PRODUCTS COMPANY, INC., and WILLIAM ARMSTRONG & SONS, INC.


HIGGINBOTHAM, J.


The opinion of the court was delivered by: HIGGINBOTHAM

I

INTRODUCTION

 The plaintiffs, the Venzie Corporation ("Venzie") and F. M. Venzie Company, Inc. ("FMV"), instituted this antitrust action against the defendants, United States Mineral Products Company, Inc. ("USMP") and William Armstrong & Sons, Inc. ("Armstrong"), for certain purported violations of Sections 1 and 2 of the Sherman Act, as amended, 15 U.S.C. §§ 1 *fn1" and 2. *fn2" Among the proscribed conduct the Complaint alleged that defendants had (1) conspired to monopolize or attempt to monopolize the relevant product market of asbestos-free spray fireproofing materials in the Philadelphia vicinity; (2) that defendants had employed unlawful tying arrangements; (3) there had been illegal territorial division of markets and the imposition of anti-competitive resale restrictions; and (4) the defendants had engaged in a concerted refusal to deal.

 This matter was duly tried to a jury, whereupon at the conclusion of the presentation of the plaintiffs' evidence both defendants moved for directed verdicts in accordance with Fed. R. Civ. P. 50(a). *fn3" The Court ruled that on the evidence adduced by the plaintiffs they had failed to establish a prima facie case regarding the tying arrangements and the territorial division of markets. The Court determined further that assuming arguendo that either defendant unilaterally possessed monopoly power over the asbestos-free spray fireproofing materials the plaintiffs clearly had not demonstrated that there was "the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident" in contravention of United States v. Grinnell Corp., 384 U.S. 563, 570-571, 86 S. Ct. 1698, 1704, 16 L. Ed. 2d 778 (1968). Moreover, insofar as the plaintiffs were arguing that where USMP or Armstrong separately and without agreement refused to deal with the plaintiffs, the Court additionally held that such unilateral refusals to deal were not per se violations of Section 1 of the Sherman Act and defendants were entitled to directed verdicts.

 The Court reserved its judgment on the conspiracy issues, namely, whether there was a conspiracy to monopolize, a conspiracy to attempt to monopolize or a conspiracy to refuse to deal. Upon completion of the defendants' evidence, defendants renewed their motions for directed verdicts. In a Memorandum Opinion dictated from the Bench the Court noted that the trial record preponderated in favor of finding as a matter of law that the relevant product market included all structural steel fireproofing materials rather than solely non-asbestos fireproofing spray products and that plaintiffs had not met their burden of proof in establishing that USMP's new product was any significant portion of the total structural fireproofing market. The Court also declared that the plaintiffs had not shown that there was any anti-competitive motive or effect relative to the defendants' conduct toward the plaintiffs in refusing to deal.

 Notwithstanding the Court's rulings, in the interest of judicial economy the Court deemed it feasible to submit the conspiracy and relevant product issues to the jury, since such a procedure would require only an additional two or three days of trial time and could possibly obviate a second trial encompassing maybe five or six weeks should an appellate Court disagree with its rulings. Upon submission of the case to the jury, the jury's answers to specially prepared interrogatories concluded that the relevant product market should be limited to only non-asbestos spray fireproofing products and that the defendants had participated in a concerted refusal to deal with the plaintiffs. The jury however determined that the defendants had not conspired to monopolize or conspired to attempt to monopolize the relevant product market. Trebling the damages awarded the plaintiffs, the verdict was recorded in the amount of $336,402.

 The defendants have now moved the Court for judgment n.o.v. pursuant to Fed. R. Civ. P. 50(b) *fn4" or in the alternative for a new trial, and the plaintiffs have petitioned the Court for the assessment of reasonable counsel fees in the amount of $100,000 in accordance with Section 4 of the Clayton Act, 15 U.S.C. § 15. *fn5" For reasons hereinafter appearing, the defendants' motions for judgment n.o.v. are Granted.

 II.

 HISTORY OF THE CASE.

 On a motion for directed verdict or judgment n.o.v. the Court is obligated to view the entire record in a light most favorable to the party opposing the motion, extending to the plaintiff the benefit of every inference which can be reasonably drawn from the evidence. The Court is appropriately cautioned that it does not undertake to appraise the weight or the credibility of the evidence presented in the case. See, e.g., Brady v. Southern Ry. Co., 320 U.S. 476, 479-480, 64 S. Ct. 232, 234, 88 L. Ed. 239 (1943); Woods v. National Life and Accident Insurance Company, 347 F.2d 760, 768 (3d Cir. 1965); Independent Iron Works, Inc. v. United States Steel Corp., 322 F.2d 656, 661 (9th Cir. 1963); Delaware Valley Marine Supply Co. v. American Tobacco Co., 297 F.2d 199, 202 (3rd Cir. 1961), cert. denied, 369 U.S. 839, 82 S. Ct. 867, 7 L. Ed. 2d 843 (1962); Schad v. Twentieth Century-Fox Film Corp., 136 F.2d 991, 993 (3rd Cir. 1943); Johnson v. J. H. Yost Lumber Co., 117 F.2d 53, 57 (8th Cir. 1941); McGlinchey v. Baker, 356 F. Supp. 1134, 1136 (E.D. Pa. 1973), and Paletsky v. Farrell, 54 F.R.D. 467, 469 (M.D. Pa. 1972).

 A brief recitation of the pertinent facts will be of aid in analyzing and understanding the case at bar.

 Plaintiffs Venzie and FMV and defendant Armstrong are all engaged as applicators in the lathing, plastering and structural fireproofing business. Defendant USMP, on the other hand, is not an applicator but rather manufactures, sells and distributes fireproofing materials, including a non-asbestos fireproofing spray called Cafco Blaze-Shield DC/F, the product which the defendants refused to make available to the plaintiffs and thus precipitated this litigation.

 The background events of this case first unfold on October 2, 1969 when the Turner Construction Company ("Turner") awarded FMV the contract to do the structural fireproofing work on the Philadelphia Electric Company building at 2301 Market Street in Philadelphia ("PE"). FMV's selection for the project was based on its tendering the lowest bid of $110,000. Several weeks later Turner awarded a second contract to Venzie for it to perform all the structural fireproofing work on the Fidelity Mutual Girard Trust Building at 15th and South Penn Square in Philadelphia ("FG"). In the Fall of 1969 these two projects probably represented the largest structural fireproofing jobs in the City of Philadelphia and had been competitively sought after by practitioners of the trade. Armstrong, like other companies, had bid on both of these jobs, only to be rejected because it did not submit the lowest bid.

 Contemporaneous with these events, several governmental agencies -- the Pennsylvania Department of Environmental Resources, Air Management Services of Philadelphia ("AMS"), and the Occupational & Radiological Health Section of Philadelphia -- were conducting investigations relative to the health hazards arising out of the utilization of spray fireproofing materials containing asbestos. There was a growing concern among governmental officials that unless asbestos-bearing spray fireproofing products were properly contained, serious ecological and health risks could result.

 Notwithstanding the contractual obligations and the commitments made to the City, the plaintiffs did not adhere to their promises. Numerous citations were issued against FMV and Venzie for violating the City's Air Pollution Code in failing to contain the fireproofing materials within the building confines. The City of Philadelphia instituted an equity action against Venzie and Turner on March 20, 1970 relative to the FG job to compel total containment of the spray fireproofing materials as had been previously agreed upon when the spray permit had been granted by the City. On April 2, 1970 a Stipulation was entered and approved by a Judge of the Common Pleas Court of Philadelphia, committing Turner and Venzie to have complete containment of the spray fireproofing material used at the construction sites. Despite the execution of this Stipulation, Venzie received additional citations on April 30, June 9, 11 and 17, 1970 for its continued failure to contain the spray fireproofing materials. *fn6"

 On June 23, 1970 spraying operations had reached the tenth floor of the FG building. Due to Venzie's continuing failure to contain the asbestos-bearing spray the Philadelphia District Attorney initiated a criminal action against Venzie, resulting in a suspension of the work on the FG project pending resolution of the legal questions. Spraying operations were simultaneously stopped at the PE job as Turner and FMV awaited the outcome of Venzie's legal difficulties with the City.

 Even though Venzie had originally submitted a bid to Turner expressly agreeing to a 100% containment of the spray fireproofing material for a lump sum, Venzie was now able to renegotiate the contract with Turner whereby Venzie would be reimbursed for costs and additionally provided a fee of 10% for overhead and 5% profit. A similar alteration was reached between Turner and FMV with 10% being allowed for overhead and profit.

 On July 21, 1970, Venzie pleaded nolo contendere to the criminal charges brought against it by the District Attorney's Office and paid a fine of $750.00. An Order was entered by the Common Pleas Court Judge permitting Venzie to continue applying an asbestos-bearing fireproofing material on the FG building. The Order however included the following proviso:

 
"Immediately upon approval for use in accordance with the standards set forth under the Philadelphia Fire Code of a non-asbestos fireproofing material, such material shall be used for future fireproofing in place of asbestos-bearing material."

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