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PRECISION POLYMERS, INC. v. PILLAR INDUS. PRODS. C

June 22, 1977

PRECISION POLYMERS, INC., Plaintiff,
v.
PILLAR INDUSTRIAL PRODUCTS CORP., ROBINTECH INCORPORATED and PLASTILINE, INC., Defendants



The opinion of the court was delivered by: TEITELBAUM

The above-captioned antitrust litigation is presently before the Court on plaintiff's application for preliminary injunctive relief under Rule 65(a) of the Federal Rules of Civil Procedure. A hearing has been held, and the written and oral arguments of the parties duly considered. For reasons set forth below in a form intended to constitute findings of fact and conclusions of law in accordance with Rule 52(a) of the Federal Rules of Civil Procedure, the preliminary injunction sought by plaintiff will be denied.

 BACKGROUND

 This is an action for injunctive relief and treble damages brought by plaintiff Precision Polymers, Inc. ("Precision") under Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2, and §§ 3, 4 and 16 of the Clayton Act, 15 U.S.C. §§ 14, 15 and 26. The complaint also asserts a pendent claim for compensatory damages for malicious interference with advantageous business relationships between plaintiff -- a New Jersey-based manufacturer and nationwide distributor of industrial plastic pipe and accessories (i.e., valves, fittings and cement) -- and its various sales representatives, including defendant Pillar Industrial Products Corp. ("Pillar").

 Defendant Pillar is a Pennsylvania corporation with its principal place of business in Leetsdale, Pa. During the period relevant hereto, Pillar has been the exclusive regional sales agent for sale of the products manufactured by Precision and distributed throughout Western Pennsylvania, Eastern Ohio, Western New York and West Virginia (the "Western Pennsylvania Region" or "Region"). Additionally, Pillar has been the bailee for hire of plaintiff's inventory in the Region.

 Defendant Robintech, Incorporated ("Robintech") is a Texas-based corporation engaged in, inter alia, the manufacture of industrial plastic pipe and of polyvinylchloride (PVC), a substance used in the manufacture of such pipe and accessories. Robintech apparently enjoys a controlling interest in defendant Plastiline, Inc. ("Plastiline"), a Florida-based New York corporation. Plastiline manufactures and distributes plastic valves, fittings and cement, at times selling such products together with industrial plastic pipe made by Robintech, all in competition with the products manufactured by plaintiff. Plastiline maintains a sales outlet and warehouse for the sale of these products throughout the Western Pennsylvania Region in Leetsdale, Pa.

 The exclusive business relationship between Precision and defendant Pillar is governed by a written contract permitting the latter to terminate the agreement on 30-days notice to plaintiff. Pursuant thereto, on March 22, 1977, Pillar noticed its intention to terminate its relationship with Precision.

 Subsequently, on April 20, 1977, Pillar informed plaintiff that it would in fact consider its contract with Precision terminated as of April 22, 1977 -- and, further, that Pillar thereafter would enter into an exclusive sales agency and distribution arrangement with Robintech and Plastiline, the operative effects of which apparently would be (1) to constitute Pillar the exclusive agent for Robintech and Plastiline in the Western Pennsylvania Region; (2) to obligate Pillar to handle at least the same product lines for Robintech and Plastiline as it handled for Precision; (3) to obligate Pillar to "refuse to deal" (plaintiff's language) in competitive products, including plaintiff's; and (4) to eliminate Plastiline's Leetsdale warehouse and replace it solely with Pillar's.

 The instant lawsuit followed.

 PRECISION'S STATUS

 It is clear from the testimony adduced at the hearing before this Court that Pillar's decision to exercise its contractual right to terminate its exclusive agency agreement with plaintiff was motivated by a not unreasonable concern over Precision's currently severe financial difficulties.

 Plaintiff presently is operating as a debtor-in-possession under Chapter XI of the Bankruptcy Act -- a status assumed in October, 1976, pursuant to a petition for an arrangement filed by Precision in the United States District Court for the Southern District of New York. Since that time, Precision has consistently suffered substantial operating losses, now totaling more than $1,000,000.

 The Court has heard testimony that despite plaintiff's rather bleak financial situation, Pillar continues to enjoy a profitable business relationship with Precision, and that the latter has continued to fulfill the orders placed with it by Pillar in a timely fashion and to provide Pillar with a stable, uninterrupted source of supply. We also have heard countervailing, though not necessarily conflicting testimony that Precision's financial plight has caused Pillar to experience some difficulty in maintaining inventory levels, in receiving certain material and the payment of earned commissions from plaintiff, and in obtaining payment of certain freight bills owed by Precision; additionally, it appears that Pillar currently is unable to offer or supply its customers all of the items listed in Precision's catalogue because of plaintiff's inability to purchase all such items from its suppliers.

 What is plain in any event is that it was Pillar's legitimate concern that Precision would not emerge from Chapter XI proceedings (and its consequent concern over its own continuing ability to meet the needs of its customers) -- coupled with what plaintiff candidly acknowledges as the bright prospects for a substantial increase in Pillar's profits *fn1" -- that prompted John Pillar, the company's president and majority stockholder, to contact Robintech and Plastiline in the early part of 1977 in order to explore the possibility of representing them. The ensuing discussions, initiated entirely by Pillar, gave rise to defendants' proposed exclusive agency arrangement, and to Pillar's notice of its attendant intention to terminate its similar arrangement with plaintiff.

 As discussed infra, plaintiff asserts that due to its present legal and financial status, termination of the Pillar-Precision agreement, if permitted by a judicial refusal to maintain the status quo via an injunction pendente lite, would result in certain irreparable injury to Precision. Indeed, it is plaintiff's rather stark assertion that if its arrangement with Pillar is permitted to be terminated, Precision simply will not be able to survive as an operating company -- its reorganization under Chapter XI will fail and it will be forced into bankruptcy and liquidation. ...


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