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R.S.E., INC. v. PENNSY SUPPLY

September 11, 1981

R.S.E., INC., d/b/a Harrisburg Asphalt Company and d/b/a Wellsboro Asphalt Co., Plaintiff,
v.
PENNSY SUPPLY, INC., Union Quarries, Inc., Hempt Bros., Inc., Silver Springs Construction Co., Kimbob, Inc., Robert M. Mumma, Robert M. Mumma, II, Max C. Hempt, Gerald L. Hempt, George F. Hempt, Bobali Corporation and 441 Corporation, Defendants



The opinion of the court was delivered by: RAMBO

MEMORANDUM

To relate the history of this case in toto would require a Herculian effort on the part of the court, which is neither required nor warranted in this instance. Hence, this condensed, but satisfactory, version follows.

 On August 2, 1977, plaintiff filed its complaint, alleging various violations of the antitrust laws and tortious interference with business relationships. Answers were timely filed thereto. An amended complaint was filed on November 14, 1977, and again answers were timely filed thereto. On June 8, 1978, after receiving approval by the court, plaintiff filed a second amended complaint, adding additional defendants. Protracted discovery and pre-trial motions ensued for the next year and a half. On December 7, 1979, the court ordered that discovery be completed by February 22, 1980 and dispositive motions be filed by March 7, 1980. Pursuant to a request for extension of discovery period by plaintiff, the court, on February 22, 1980, extended the discovery deadline until March 22, 1980, with dispositive motions to be filed by March 31, 1980. On March 3, 1980, at the request of plaintiff, the date for filing of dispositive motions was again extended until April 4, 1980. A final extension requested by plaintiff was granted on May 1, 1980, giving plaintiff until June 5, 1980 to file dispositive motions and establishing the dates for response and reply briefs.

 All of the defendants filed motions for summary judgment prior to the commencement of trial, which was June 2, 1980. On April 14, 1980, the court granted partial summary judgment in favor of defendants on the plaintiff's claims under sections 2(a) and 2(e) of the Clayton Act, as amended by the Robinson Patman Act, 15 U.S.C. §§ 13(a) and (e). 489 F. Supp. 1227. The counterclaims filed by various defendants were severed and a separate trial ordered thereon, by order dated May 28, 1980. On May 30, 1980, the court granted the motion for summary judgment by defendant Locust Point Quarries in regard to all claims under the antitrust statutes and dismissed, without prejudice, all state claims asserted against them. In addition, the court granted in part and denied in part, defendants' motions for summary judgment.

 On June 2, 1980, the selection of the jury commenced and the trial opened on June 4, 1980. It proceeded at a snailspace through the months of June, July, August and September, with several motions by plaintiff to alter the witness list, add additional witnesses, and conduct allegedly limited discovery with respect to the Joseph Ciccone Co., an allegedly comparable firm. On September 12, 1980, plaintiff was ordered to proceed with calling his witnesses in the order listed in plaintiff's August 12, 1980 witness list.

 Defendants began to present their case in defense on January 19, 1981 and concluded their defense on February 19, 1981. Plaintiff commenced its rebuttal testimony on February 20, 1981 and closed its case on March 13, 1981. Motions for directed verdict were reasserted by both plaintiff and defendants at the conclusion of all the evidence. The jury was charged on March 21, 1981 and returned a hung verdict on all but one claim on March 31, 1981.

 Motions for judgment notwithstanding jury's failure to reach a verdict (hereinafter referred to as n. o. v.) were filed by both plaintiff and defendants as per the court's instructions and an expanded briefing schedule was established, which afforded all parties more than adequate time to present their respective arguments. Appropriate response and reply briefs have been filed and the court is now in a position to decide the respective motions for judgment n. o. v. *fn1"

 It is undisputed that in ruling on Rule 50(b) motions, the court "must consider the record as a whole and in the light most favorable to the non-moving party, drawing all reasonable inferences to support its contentions." Edward J. Sweeney & Sons, Inc. v. Texaco, 637 F.2d 105, 115 (3d Cir. 1980); Columbia Metal Culvert Co., Inc. v. Kaiser Aluminum & Chemical Corp., 579 F.2d 20, 25 (3d Cir.), cert. denied, 439 U.S. 876, 99 S. Ct. 214, 58 L. Ed. 2d 190 (1979). A corollary to that holding is the fact that in order to find in favor of the plaintiff on a motion for judgment n. o. v., plaintiff must prove all of the elements of the offense, whereas a defendant may prevail on a motion for judgment n. o. v. if it can prove any element has not occurred.

 Plaintiff's Motion for Judgment n. o. v.

 In its brief in support of its motion for judgment n. o. v., plaintiff addresses the following:

 
1. The joint sales agency between
 
a. Pennsy Supply, Inc. (hereinafter Pennsy) and Union Quarries, Inc. (hereinafter Union); and
 
b. Pennsy and 441 Corporation (hereinafter 441).
 
2. Price fixing on stone between Pennsy and Hempt Brothers, Inc. (hereinafter Hempt).
 
3. Concerted refusal to deal by all defendants. *fn2"
 
4. Attempted monopoly of blacktop and stone aggregate by Pennsy and Hempt individually.
 
5. Conspiracy to monopolize the production of blacktop and stone aggregate between Pennsy, Hempt and Union.

 Joint Sales Agency

 Plaintiff's key premise in this allegation is that the joint sales agency between Pennsy and Union and Pennsy and 441 constituted a price fixing technique and was a per se violation of § 1 of the Sherman Act. In support of classifying the joint sales agency as a per se offense, plaintiff cites L. Sullivan, Handbook of the Law of Antitrust (1977), which states:

 
An arrangement involving a partial integration of functions, which may achieve significant economies of scale among competitors, also may escape per se treatment, even though it eliminates price competition between the firms that participate in it. To qualify for the application of the rule of reason, the arrangement must have the following two characteristics: first, the elimination of price competition between the participating firms must result directly from the partial integration of their functions; second, this elimination of price competition must not appear to significantly reduce market-wide competition. When these two conditions are met, the arrangement is not characterized as a price restraint and its legality is determined only after a full analysis to determine the extent of any reduction in competition and the extent to which integration benefits may be obtained. Id. at 206.

 Plaintiff contends these two conditions are not met in the instant case and therefore the joint sales agency should be classified as a per se offense.

 With this the court cannot agree. There is no question that any elimination of price competition was a direct result of the partial integration of functions of the respective firms. Further, the potential elimination of price competition did not have a significant reduction in market-wide competition because of the number and size of other competitors, who would gladly have underbid Pennsy, Union, or 441 if their bids became uncompetitive. For these reasons, the court is compelled to evaluate the joint sales agency under a rule of reason approach.

 The court does not agree with defendants Pennsy, Union, and 441 that the "intraenterprise conspiracy doctrine" applies in the instant case. However, as discussed below, plaintiff's claim fails under the rule of reason test for another reason. In analyzing a restraint under the rule of reason, the court must determine whether the relevant markets, defined as both geographic and product market, are unreasonably affected. This can be accomplished by applying a percentage test or by analysis of the market structure. 1 Von Kalinowski, Antitrust Laws and Trade Regulation § 6.02(4)(c)(i) (1981). Plaintiff adduced no competent evidence to show that the relevant geographical market, which was defined by the jury as something larger than the "yellow blotch" proffered by plaintiff, was unreasonably affected. The figures from the Coopers and Lybrand study, specifically Exhibit IV (designated as R5177.2) do not bear out plaintiff's assertion that defendants Pennsy, Union, and 441 had nearly half of the relevant geographic market because the study did not cover only the area designated by the jury as the relevant market and no other data existed to determine the effect on the relevant market. Without competent evidence to show what effect would have resulted in the relevant geographic market, plaintiff could not prove that the joint sales agency was a violation of § 1 of the Sherman Act when viewed by the rule of reason test. See, 1 Von Kalinowski, Antitrust Laws and Trade Regulation § 6.02(4)(c)(i) and (ii) (1981). For these reasons, plaintiff's motion for judgment n. o. v. on the joint sales agency issue will be denied.

 Price Fixing of Stone

 Defendants Pennsy and Hempt countered this testimony with that of Mr. Hempt and Mr. Mumma who testified that they never entered into a conspiracy to fix prices, that they did have telephone conversations concerning the price of stone but that these related to legitimate sales between Pennsy and Hempt, and that because each were customers of the other on occasion, published price lists were sent out. Taken in the light most favorable to defendants, Ms. Horne's testimony clearly does not support the granting of a judgment n. o. v. on price fixing for plaintiff.

 Plaintiff next contends that the testimony of Dan Grove shows there was a conspiracy to fix prices on behalf of Pennsy and Hempt. This contention is best addressed by subsequent testimony of Dan Grove which reads as follows:

 
Q. Mr. Grove, do you remember depositions of September 13, 1978. At that time you told me, did you not, that you had no knowledge or information concerning the price fixing of stone. Isn't that correct?
 
A. That's true.
 
Q. And you had no knowledge or information concerning the price fixing of cement concrete, isn't that correct?
 
A. Yes.
 
Q. And you had no knowledge or information concerning price fixing of asphaltic concrete, isn't that correct?
 
A. Yes.
 
Q. Do you remember at that deposition you testified that you had no knowledge or information concerning any improper acts of Max Hempt. Is that correct?
 
A. Yes.
 
(Transcript, Vol. 11, p. 1638-39.)

 The totality of Mr. Dan Grove's testimony cannot support the granting of judgment n. o. v. for plaintiff on its price fixing claim as it is conflicting at best.

 Plaintiff also argues that the discussion of stone prices by the Hempts and Mummas at the board of directors meetings of Union establishes a price fix. Plaintiff contends this shows the explicit exchange of pricing data by officials of defendant companies. This argument is perhaps the most convincing one presented by plaintiff and the one that is most perplexing to the court. To rebut this testimony, defendants proffer the testimony of Wally Lewis, the fifth director of Union, who testified that Union's prices were set strictly on its costs and that neither Hempt's nor Pennsy's prices were discussed at these meetings. Defendants contend this is just more of the "opportunity" evidence and that such evidence, even when coupled with parallel business conduct, is not necessarily probative evidence, citing Weit v. Continental Illinois National Bank & Trust Co., 641 F.2d 457 (7th Cir. 1981).

 While the court does not agree with defendants that such testimony could not be the basis for a decision in favor of plaintiff by a jury, it cannot say that a jury could not reasonably conclude otherwise, which is what the court must find if it is to grant plaintiff's judgment n. o. v. Because it is a jury question and because ...


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