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HANCOCK PAPER CO. v. CHAMPION INTL. CORP.

November 15, 1976

HANCOCK PAPER COMPANY
v.
CHAMPION INTERNATIONAL CORPORATION



The opinion of the court was delivered by: NEWCOMER

 Plaintiff Hancock Paper Co. has filed a Robinson-Patman Act (15 U.S.C. § 13 et seq.) claim against defendant Champion International Corp., alleging price discrimination in the selling of certain types of "poly coated" waste paper used in the manufacture of milk cartons. Defendant has counterclaimed for the total amount of Hancock's remaining amount due on their contract, stipulated to be $106,849.11. Plaintiff originally pleaded Sherman and Clayton Act violations, but those claims have been withdrawn without prejudice. Defendant has moved for summary judgment on plaintiff's claim and defendant's counterclaim. For reasons set in the memorandum below, defendant's motion will be granted.

 In order to grant summary judgment under Rule 56, Fed. R. Civ. P., the Court must find there are no issues as to the existence of a material fact. All doubts as to the existence of a genuine issue as to a material fact must be resolved against the movant. First Pennsylvania Banking and Trust Co. v. United States Life Insurance Co., 421 F.2d 959 (3d Cir. 1969). Although facts presented by the parties here are disputed, they are not material. Defendant is entitled to judgment as a matter of law even if the disputed facts are viewed in the light most favorable to the plaintiff. Therefore, summary judgment must be granted. Kao v. Red Lion Municipal Authority, 381 F. Supp. 1163 (M.D. Pa. 1974).

 Defendant Champion operates five Dairy Pak plants at which polyethylene-coated paper (also referred to as "polycoated" paper) is made into milk cartons. Champion manufactures the paper at Canton, N.C., and coats it at its extruding plant at Waynesville, N.C. The paper is shipped from Waynesville to the Dairy Pak plants where it is processed into milk cartons, with printing applied there on top of the polycoating.

 Champion itself could not use the printed broke, No. 2, for a variety of reasons, the most important being that it had no bleaching facilities. Since 1973, Champion had not marketed any No. 1 broke, retaining it all for in-house use.

 By letter of May 29, 1975, Champion solicited bids for the No. 2 broke which would be generated from July 1 to December 31, 1975, estimated to be 469 tons (Inquiry No. 66-B-5, Plaintiff's Exhibit "D"). The offer specifically referred to the product as "No. 2 (printed), baled, polycoated waste generated in our five Dairy Pak Plants." Plaintiff claims it understood that no No. 1 broke was to be sold on the market, though no statements to that effect at or before contract formation have been shown in letters or indicated in oral depositions. Plaintiff bid $120.00 per ton (Plaintiff's Exhibit "E"), stating it was for "your poly milk waste generated at the five Dairy Pak plants," and specifically referred to Inquiry No. 66-B-5. This was accepted as the high bid by defendant (Plaintiff's Exhibit "F") for broke "as outlined in the subject inquiry."

 In July, 1975, both parties agree that David Ball of Champion called David Berkowitz of Hancock and offered him ten carloads of No. 1 broke. (Plaintiff's Memorandum of Law at 6; Affidavit of David B. Ball, Plaintiff's Exhibit "H"). Berkowitz said he would call Ball later. In the meantime, defendant contacted two other companies, Pioneer Paper Stock Division, Container Corporation of America, and Potlatch Forests, Inc. Both submitted bids and Pioneer's was accepted.

 Hancock claims that Champion made a second sale of No. 1 broke, consisting of 570 tons from the Dairy Pak plants, without notifying plaintiff or offering it to them. Champion contacted a few potential customers and solicited bids in August, 1975. This resulted in Howard Zuker Associates buying 470 tons for $80.00 per ton and Pioneer paying $105.00 per ton for 100 tons.

 Hancock claims that it began encountering marketing problems due to the extra Champion broke on the market. Due to these difficulties, it entered into a fall-back agreement with Potlatch for $130.00 per ton F.O.B., which resulted in a loss for Hancock on the No. 2 broke.

 THE ROBINSON-PATMAN ACT CLAIM

 Plaintiff claims that the sale to Howard Zuker Associates violated the Robinson-Patman Act by discriminating against Hancock with respect to price. This discrimination allegedly arose "because [Champion] knew it would be selling the broke to Zuker at a price lower than it was selling to Hancock during the same period that it was selling to Hancock . . ." (Plaintiff's Memorandum of Law at 22). Plaintiff does not allege that Champion offered a set price which was accepted by Hancock and offered a lower price which was accepted by Zuker. Both prices were admitted to have been set by the buyers, through a bidding process. Instead, the essence of Hancock's claim is that Champion controlled the second bidding process in such a way as to work a "price discrimination" within the meaning of the Act.

 Hancock argues that the bidding was not really "competitive," since the No. 1 broke was not formally offered to all usual prospects by circulating an Inquiry letter. This is true, but it does not constitute a Robinson-Patman Act violation. Champion called a few potential bidders, soliciting bids by phone. There is no difference whether the broke was offered to two or 25 prospective purchasers since Champion still did not establish the price itself. Champion admits that this limited offer was a device to keep the bids high (Ball deposition at 76-77). The secret offer was designed to offset a sudden drop in prices that might have resulted had it been widely known that a significant extra amount of broke had unexpectedly been placed on the market. Hancock claims that Champion intended this secretive dealing to result in a lower price than Hancock paid. Although Champion may have known the price would necessarily be lower, if Champion had not dealt so discreetly and the presence of the No. 1 had become widely known, the flooded market probably would have experienced sharper price declines than it did. If the bottom had fallen out of the market completely, Hancock would not have ever been able to enter into its fall-back deal. Therefore, although Champion knew it would be ...


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