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CROMAR CO. v. NUCLEAR MATERIALS & EQUIP. CORP.

June 12, 1975

The Cromar Co., Plaintiff
v.
Nuclear Materials And Equipment Corp. and Atlantic Richfield Co. Defendants


Muir, D.J.


The opinion of the court was delivered by: MUIR

This case was filed on June 18, 1974. It is a private, treble-damage antitrust action alleging violations of the Sherman and Clayton Acts, 15 U.S.C. §§ 1, 2 and 15. The cut-off date for discovery was May 19, 1975. The case is on the June trial list and will be reached for trial about June 17, 1975. On May 20, 1975, the Defendants, Nuclear Materials and Equipment Corporation (NUMEC) and Atlantic Richfield Company (Arco), filed a motion for summary judgment. The Plaintiff filed its responsive brief on June 4, 1975.

 I. Background.

 At all times relevant to this action, NUMEC was a wholly-owned subsidiary of Arco. In 1967, Arco created a task force to investigate the possibilities of production of a "wood-plastic composite." On April 9, 1968, the President of Arco authorized a development program for a wood-plastic composite parquet flooring branded "Permagrain". NUMEC was responsible for production and Arco for marketing of Permagrain. Prior to the April 9, 1968 decision authorizing a development program, Cromar had been considered by Arco and NUMEC as a possible supplier of wood for the project. The official selection of Cromar occurred in the late summer or fall of 1968. A contract, however, was not executed until March 19, 1969. The contract is nominally between Cromar and NUMEC. However, there is no dispute that Arco personnel took an active role in the pre-contractual negotiations and that Arco approved the contract before its signing by NUMEC.

 Although no contract had at the time been consummated, throughout 1968 and early 1969 Cromar supplied wood fillets to the PermaGrain program for processing at the NUMEC facilities at Quehanna, Pennsylvania. Also, during the pre-contractual period, Cromar supplied other related services to NUMEC.

 The contract in question provides that Cromar will supply to the PermaGrain program red oak wood fillets which meet certain specifications and called for a total production by Cromar of 12 million square feet of fillets at a yearly rate of 3 million square feet. The fillets were to undergo a several-step process. They were shipped to NUMEC's facility at Quehanna, where they were impregnated and irradiated by a special atomic process which converted them into a wood-plastic composite. They were then returned to Cromar for final assembly and finishing. In the process seven fillets were joined to make a square piece of wood with 6 1/8" sides. Four of these squares were then assembled to create what is called a finished parquet panel approximately one foot square.

 The contract contained specifications, inter alia, which Cromar was required to meet with respect to the allowable maximum gaps between fillets in the final product. The contract provided for a quality assurance program consisting of inspections by Cromar employees followed by "over-inspection" by NUMEC personnel. Cromar's remuneration under the contract was tied to its ability to meet specifications with respect to the allowable gaps between fillets. The contract provided that NUMEC could terminate the contract if in any month more than 25% of Cromar's production failed to qualify as "prime" product. There was also an incentive to Cromar for a production of prime panels in excess of 87.3% of the monthly production.

 The contract provided for changes in the basic rate to which Cromar was entitled if there were cost increases caused by NUMEC. The "start-up" date for the contract was May 1, 1969. By agreement of the parties, the date was postponed to July 1, 1969 because of late arrival of equipment at the Cromar plant.

 Almost one year later, on June 18, 1970, NUMEC terminated the contract. As grounds for the termination, NUMEC cited the alleged failure of Cromar to achieve a sufficient monthly percentage yield of "prime" panels. The primary cause of this alleged low yield was gaps between fillets in excess of the contract specifications.

 II. The Motion.

 In reaching its decision on the motion for summary judgment before it, the Court may refer to the pleadings, depositions, answers to interrogatories, admissions on file, affidavits, and any other material that would be admissible or usable at trial. F.R. Civ. P. 56(c); Wright and Miller, Federal Practice and Procedure, § 2721, p. 473, n. 9. Summary judgment may be rendered only if, after a review of those documents, the Court finds that "there is no genuine issue as to any material fact" and that "the moving party is entitled to a judgment as a matter of law." F.R. Civ. P. 56(c). In Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 7 L. Ed. 2d 458, 82 S. Ct. 486 (1962), the United States Supreme Court stated that "summary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles."

 With respect to Cromar's allegation that NUMEC and Arco have violated § 1 of the Sherman Act, 15 U.S.C. § 1, the Court finds that there are genuine issues as to facts material to that contention which prevent entry of judgment in favor of NUMEC and Arco. With respect to Cromar's allegation that NUMEC and Arco attempted to monopolize in violation of § 2 of the Sherman Act, 15 U.S.C. § 2, the Court finds that there is no genuine issue as to any material fact relevant thereto that NUMEC and Arco are entitled to summary judgment in their behalf as a matter of law.

 A. Sherman Act § 1 Claim.

 Almost immediately after Cromar began production of panels for the PermaGrain program in July, 1969, problems and controversy developed. Arco and NUMEC contend that they voluntarily made extensive efforts to aid Cromar in meeting its requirements under the contract. They assert that, motivated by a genuine desire to have Cromar comply with the contract and by a concern for their PermaGrain program, they provided economic and technical assistance as well as personnel to Cromar beyond that called for in the contract. They maintain that they even for a short while agreed to a relaxation of specifications in order to attempt to help Cromar achieve greater production. They insist that all their activities with respect to Cromar were dictated by sound and legitimate business motives, and were designed to help ...


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