Appeal from the United States District Court for the Middle District of Pennsylvania; D.C. Civil No. 85-00684.
Stapleton and Mansmann, Circuit Judges, and Ackerman, District Judge.*fn*
In this antitrust matter involving the highly competitive food distribution business, we are asked to review a grant of summary judgment in favor of the defendants, a supplier and a wholesaler, and against the plaintiff wholesalers. The litigation primarily involves allegations of secondary line price discrimination in violation of sections 2(a) and 4 of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. §§ 13(a), 15 (1936). Secondary line injury cases are characterized by price discrimination by a seller in sales to competing buyers.
Also at issue are whether the plaintiffs presented sufficient and relevant material facts to defeat the entry of summary judgment on a Sherman Act claim, i.e., did a conspiracy exist between the supplier and a competing wholesaler to discriminate in price to the detriment of the plaintiff-wholesalers, and whether one of the plaintiffs had the standing to bring this lawsuit. The plaintiffs allege that the district court usurped the function of the jury by improperly resolving disputed questions of fact and by evaluating the credibility of the testimony.
On review de novo, we conclude first, with respect to the Robinson-Patman Act claim, that the plaintiff has presented sufficient evidence supporting its position that, over a four year period of time, the defendant supplier discriminated against it in the prices charged for portion-controlled products. Genuine issues of material fact exist concerning whether the discrimination caused competitive injury (i.e., a reasonable possibility of harm to competition) which resulted in actual damage to the plaintiff. We will, therefore, vacate the district court's grant of summary judgment on this claim and remand for trial.
As to the Sherman Act claim, the present record does not reflect sufficient evidence of either the conspiracy or arrangement to exclude the plaintiff from the food distribution market to sustain a Sherman Act violation. We are aware, however, that the district court limited discovery to the issues of competitive impact and injury in the context of the Robinson-Patman claim. Since the plaintiffs alleged, in an affidavit filed pursuant to Fed. R. Civ. P. 56(f), that further discovery will uncover evidence of the conspiracy, we will vacate the dismissal of this count and remand for further discovery.
Finally, we find that the district court erred in deciding that Plaintiff Juniata Foods, Inc., does not have standing to proceed in the action. In conflict with other evidence, an affidavit indicates that Juniata was a wholesaler who directly purchased from Serv-A-Portion. Once again questions of material fact remain for the factfinder. Juniata, at this stage, will remain in the lawsuit.
The plaintiffs, J.F. Feeser, Inc., now known as Feesers, Inc., and Juniata Foods, Inc., commonly-owned corporations, are wholesale distributors of food products and related items to institutional purchasers (e.g., schools, nursing homes, hospitals, caterers and restaurants). Defendant Weis Markets, Inc., is engaged in the business of distributing food and related products to the same type of institutional customers to whom Feeser and Juniata distribute and is, therefore, in direct competition with them. Defendant Serv-A-Portion, Inc., is a manufacturer and packager of food products which it sells to distributors. Serv-A-Portion is a leading supplier of portion-controlled food products, such as individual servings of ketchup, jelly, syrup and dressings. Serv-A-Portion has sold, and its successor, DiGiorgio Foods,*fn1 has continued to sell, a variety of portion-controlled products to Feeser, Weis Markets and other competitors, including Tartan Foods and Sky Brothers, in interstate commerce. The claims against Hunt-Wesson Foods, Inc., also a manufacturer and packages of the portion-controlled products, have been settled.
It is undisputed that food distribution is a highly competitive business. Since portion-controlled products are primarily "give away" items,*fn2 the end user (i.e., the final institutional purchaser) is sensitive to minute price differences between the competing wholesalers. In addition, these particular products are considered "bellwether" items which are customarily utilized as a gauge by the distributor's customers to evaluate a company's overall pricing. Accordingly, it is contended by Feeser and Juniata that its inability to offer competitive prices on Serv-A-Portion products not only impacted on its overall business goodwill but also caused the loss of other business.
The impact of these price differences prompted Feeser and Juniata*fn3 in 1985 to file a complaint contending that Serv-A-Portion discriminated against them in the prices it charged for its portion-controlled products and in favor of its competitors, Weis Markets, Tartan Foods and Sky Brothers. The alleged discrimination primarily involved the manner in which Serv-A-Portion conducted its pricing policies. According to Feeser, Serv-A-Portion had two general categories of pricing: truckload and bidding. It is Serv-A-Portion's bid pricing which Feeser contends operated in a discriminatory fashion. Products purchased through Serv-A-Portion's bidding process, available at lower prices, were offered to Serv-A-Portion's customers (the wholesalers) only on a case-by-case basis after submission of a formal and specific bid and on condition that they could be resold only to certain end users. It is not contested by Serv-A-Portion that its bidding requirements were not rigidly followed nor that Weis Markets used Serv-A-Portion's failure to enforce its procedures to Weis Markets' advantage by selling products purchased by bid to any of its customers.
It is also contended by Feeser that Serv-A-Portion utilized other pricing mechanisms to camouflage price discrimination, such as affording special allowances and permitting deductions. Feeser claims that although Tartan Foods and Sky Brothers derived benefits from Serv-A-Portion's deviation from established business practices, it was not granted similar advantages. As a direct result, Feeser alleges that it lost sales when its customers took advantage of the more favorable prices of Serv-A-Portion products offered by Feeser's competitors, Weis Markets, Tartan Foods and Sky Brothers. Feeser claims also that its revenues declined when it was forced to reduce its margins to attempt to meet the prices offered by the favored competitors. In addition to losing sales and incurring reduced profits, Feeser's inability to match Weis Markets' prices resulted in a loss of goodwill among its customers, so that Feeser was not asked to service them on other products.
Feeser requested injunctive relief and treble damages for violations of sections 2(a) and 2(f) of the Robinson-Patman Act and section I of the Sherman Act. Feeser also averred that the activity engaged in by the defendants represented unfair competition which violates the common law of Pennsylvania.
In September of 1985, four months after the complaint was filed, Serv-A-Portion asked the district court to require Feeser to identify and document as a threshold matter all the details of Serv-A-Portion's price discrimination and to cut off all discovery requested by Feeser relating to Serv-A-Portion's sales to competitors other than Weis Markets. On April 29, 1986, the district court entered a discovery order permitting Feeser to review only certain records maintained by Hunt and Serv-A-Portion for a one-year period to be selected by Feeser; requiring that Feeser's expert provide all parties with a price comparison report, supported by documentation, of transactions between Hunt, Serv-A-Portion and Weis Markets; and mandating that Feeser's expert provide all parties with a pricing report comparing transactions between Hunt and Serv-A-Portion and their customers.
Discovery continued in this prescribed manner. Feeser's expert economist, Dr. Robert Larner, prepared a pricing analysis that, inter alia, compared Serv-A-Portion's sales of identical products: (a) to Feeser and Weis Markets for the period January 1982 through January 1986; and (b) to Feeser, Tartan Foods and Sky Brothers for the period January 1984 through December 1984 - the year for which discovery of Serv-A-Portion's sales to those competitors was permitted.
Upon presentation of this evidence by Feeser, Serv-A-Portion contended that the report prepared by Dr. Larner did not show competitive injury and requested that discovery be focused upon the elements of competitive and actual injury. The district court then limited the next phase of discovery to competition and injury and enumerated the manner and extent of such discovery.
On June 9, 1988, Serv-A-Portion filed a motion for summary judgment directed toward the issues of competitive impact and injury. For purposes of its motion, Serv-A-Portion acknowledged a slight difference between the prices charged by Serv-A-Portion to Weis Markets and Feeser. Nonetheless, referencing primarily the overall competitive health of the institutional food industry, Serv-A-Portion contended that Feeser had not suffered any injury from any of Serv-A-Portion's pricing practices.
At the outset, the district court rejected Serv-A-Portion's position, which relied upon Boise Cascade Corp. v. FTC, 267 U.S. App. D.C. 124, 837 F.2d 1127 (D.C. Cir. 1988), that, because of the overall competitive health of Feeser and of institutional food distributors generally, there can be no competitive injury for Robinson-Patman purposes. The court disregarded this view finding Boise Cascade to be contrary to Supreme Court authority, see Utah Pie Co. v. Continental Baking Co., 386 U.S. 685, 18 L. Ed. 2d 406, 87 S. Ct. 1326 (1967) (a competitor's sales growth does not rule out a Robinson-Patman claim), and distinguishing it factually on several important grounds.
The district court then sought to determine whether Feeser could prove a Robinson-Patman violation under the doctrine of Falls City Industries Inc. v. Vanco Beverage. Inc., 460 U.S. 428, 75 L. Ed. 2d 174, 103 S. Ct. 1282 (1983), by showing lost sales or profits caused by the price differential. According to the district court, establishing lost sales caused by Serv-A-Portion's pricing policies was essential in order to demonstrate actual injury entitling Feeser to treble damages under section 4 of the Clayton Act.*fn4
In reviewing the record submitted in response to the summary judgment motion, the district court systematically excluded much of Feeser's evidence presented through depositions and affidavits. First, the district court denied consideration of depositions of a number of Feeser's salesmen, finding them to constitute hearsay. Other salesmen's depositions, the court decided, were "simply too vague, conclusory or incomplete for a reasonable jury to place reliance upon them." J.F. Feeser. Inc. v. Serv-A-Portion, Inc., No., slip op. at 10 (E.D. Pa. Aug. 4, 1989). The court found some of the depositions probative of lost sales as indicative of better prices offered to favored competitors, yet dismissed the relative worth of these depositions on the assumption that some price differentials would normally occur given the particular nature of the food distribution industry. The district court concluded that there must be more than de minimis violations, as it characterized Feeser's evidence, of the Robinson-Patman Act in both volume and price before competitive injury could be found.
The district court then examined employee affidavits submitted by Feeser. The court rejected the affidavits of Feeser salesmen Fuller and Andrews and Juniata's Miller, believing that the hearsay statements of certain customers who refused to buy from them contravened the provision of Fed. R. Civ. P. 56(e), that affidavits must be based on personal knowledge and on facts which would be admissible at trial.
Feeser had also submitted affidavits from some of the customers themselves. In general, these affidavits indicated that these customers did not buy from Feeser, but rather purchased from Weis Markets, Tartan Foods and Sky Brothers who offered better prices. The district court did find these affidavits admissible, but once again pointed to the de minimis nature of the evidence and declared that the affidavits were not probative of injury suffered from price discrimination.
The district court then turned to the evidence presented concerning other wholesalers who purchased from Serv-A-Portion.*fn5 The court accepted the testimony of Joanne Straw, who testified that her company, W.R. Straw, Inc., lost sales of Serv-A-Portion products to Pennsylvania State University because the prices Weis Markets offered to Penn State were lower than Straw's actual cost from Serv-A-Portion. The district court did not accept a similar affidavit from Joseph Spagnola, a buyer for R & R provision Company, which was based upon information from Spagnola's sales personnel, finding that it constituted inadmissible hearsay. The court then characterized this evidence from competitors as "completely non-probative." Id. at 20.
The district court next reviewed the expert report prepared for Feeser by Dr. Robert Larner in light of the Robinson-Patman test enunciated by the Supreme Court in FTC v. Morton Salt Co., 334 U.S. 37, 92 L. Ed. 1196, 68 S. Ct. 822 (1948). Under the Morton Salt test, a plaintiff can show injury to competition by providing either proof of a substantial price discrimination between competing purchasers over time or by providing direct proof of lost sales or profits.*fn6
Although rejecting Serv-A-Portion's major objection to the expert report -- that Dr. Larner did not address what Serv-A-Portion considered the relevant economic consideration -- the overall growth of competition in the food distribution industry in general and of Feeser in particular -- the district court was critical of Dr. Larner's analysis for several other reasons. First, the district court questioned Dr. Larner's use of four-year periods in his report (1978 through 1982 and 1982 through 1986). The court agreed with Serv-A-Portion that the only apparent reason for this grouping was that it achieved the results desired by Dr. Larner. The district court did not credit Dr. Larner's justification that yearly figures fluctuate for various reasons and, by using four-year periods he could establish a greater track record and eliminate unusual events or their effects in one particular year. The district court found objectionable Dr. Larner's failure to elucidate these reasons or unusual events and concluded that "a reasonable jury would not accept his conclusory reasoning as a valid basis for using four-year periods. . . ." Id. at 24.
The district court then evaluated with skepticism Dr. Larner's analysis of the increasing and decreasing percentages of Feeser's purchases from Serv-A-Portion and concluded that such comparisons between Feeser's total sales and its Serv-A-Portion purchases revealed nothing about competitive injury or discriminatory pricing. With respect to the figures of the lower prices which Feeser alleged were given to favored competitors, the district court examined the numbers and determined that if Serv-A-Portion had intended to win the favor of Weis Markets, "it did not do a very good job of it." Id. at 29.
Finally, the district court rejected Dr. Larner's calculations for the six-month period showing differences in Weis Markets' and Feeser's profit margins on the grounds that the report utilized an insufficient number of products over an insufficient period of time.
Turning to Feeser's Sherman Act claim, the district court determined that it must sustain the same fate as the Robinson-Patman allegation because Feeser had not proven any injury to itself or to competition. The district court opined that even assuming a conspiracy between Serv-A-Portion and Weis Markets to grant Weis favorable pricing, this activity, without proof of an arrangement to exclude others from the buyer's market, was not actionable under the Sherman Act. In effect, the district court found that since the sale of Serv-A-Portion products at discriminatory prices is not a Sherman Act violation, a conspiracy to do so is not actionable. The district court also pointed to the lack of evidence indicating any conspiracy or agreement between Weis and Serv-A-Portion to discriminate in price. After deciding that Juniata had no standing to participate in the lawsuit because of evidence that Juniata was not a direct purchaser from Serv-A-Portion, the district court granted Serv-A-Portion's motion for summary judgment.
The district court then turned to Feeser's claims against its competitor, Weis Markets, Inc. Although Weis Markets had not moved for summary judgment,*fn7 the court dismissed all of Feeser's claims against Weis on the ground that such claims depended upon the validity of Feeser's claims against Serv-A-Portion. The pendent state claims were dismissed without prejudice to refiling in the appropriate state court.
Feeser has appealed this final judgment and our jurisdiction is thus premised on 28 U.S.C. § 1291.
On appeal from the grant of summary judgment we review the evidence de novo and apply the same standards applicable in the district court.
The now familiar and oft-cited trilogy of Supreme Court cases, Celotex Corp. v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986), Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986) and Matsushita Electronic Industrial, Co. v. Zenith Radio Corp., 475 U.S. 574, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986) refocused the burden of both the movant and the non-movant in summary judgment actions. As a general rule, if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law, then summary judgment is appropriate. Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, 477 U.S. at 247. Although the moving party has the initial burden of identifying the evidence that demonstrates the absence of a genuine issue of material fact, the respondent (the "non-movant") must establish the existence of each element on which it bears the burden of proof. Celotex, 477 U.S. at 323. The non-movant is entitled to all reasonable inferences in its favor. We are keenly aware that credibility determinations are not the function of the judge; instead the non-movant's evidence must be credited at this stage. Anderson, 477 U.S. at 249, 255.
When summary judgment is requested in the context of antitrust litigation, adherence to this standard is appropriate. Miller v. Indiana Hospital, 843 F.2d 139 (3d Cir. 1988), citing, Matsushita Electric Industrial Co. v. Zenith Radio, 475 U.S. 574, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986).
We thus turn to the substantive legal standard applicable to each count of Feeser's complaint and review the specific evidence offered by the parties in the context of the summary judgment burdens set forth by the Supreme Court.
Section 2(a) of the Robinson-Patman Act, a 1936 amendment to the Clayton Act, provides, in pertinent part, as follows:
It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality . . . where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce or to injure, destroy, or prevent competition with any person who ...