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Stelwagon Mfg. Co. v. Tarmac Roofing Systems

filed: August 24, 1995.

STELWAGON MANUFACTURING COMPANY APPELLEE,
v.
TARMAC ROOFING SYSTEMS, INC., APPELLANT. ARGUED MAY 16, 1995



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA. (D.C. Civil No. 92-cv-01073).

Before: Cowen, Lewis, Garth, Circuit Judges.

Author: Lewis

Opinion OF THE COURT

LEWIS, Circuit Judge.

Appellant Tarmac Roofing Systems, Inc., ("Tarmac") appeals a $1,423,392.50 judgment entered after a jury trial in the United States District Court for the Eastern District of Pennsylvania on appellee Stelwagon Manufacturing Company's ("Stelwagon") secondary line price discrimination and state breach of contract claims.*fn1 Specifically, the jury found that Tarmac had discriminated against Stelwagon on the basis of price in violation of section 2(a) of the Clayton Act (commonly referred to as the Robinson-Patman Price Discrimination Act), 15 U.S.C. § 13(a) (1982),*fn2 and, accordingly, that Stelwagon was entitled to recover treble damages pursuant to section 4 of the Clayton Act, 15 U.S.C. § 15(a).*fn3 The jury also determined that Tarmac breached an oral, exclusive distributorship agreement with Stelwagon. Although we believe that Stelwagon established a prima facie violation of the Robinson-Patman Act, we believe it failed to present sufficient proof of actual antitrust damages and is, therefore, precluded from recovering damages under the Clayton Act. Accordingly, we will vacate the district court's judgment insofar as it awards Stelwagon treble damages under section 4 of the Clayton Act. We will, however, affirm with respect to the breach of contract claim because we believe the district court correctly concluded that the contract claim was not barred by the Statute of Frauds.

I. BACKGROUND

Stelwagon is a wholesale distributor of roofing, siding and related construction materials. Its principal customer base consists of small to medium-sized roofing contractors located in the Philadelphia, Pennsylvania, area. In early 1988, Stelwagon entered into an oral, exclusive distributorship agreement with Tarmac, a Wilmington, Delaware-based manufacturer of modified asphalt products ("MAPs").*fn4 Under the agreement, Tarmac agreed not to sell its MAPs to any other distributors in the Philadelphia area except for Roofer's Mart, Inc., a pre-existing distributor.*fn5 In return, Stelwagon promised to promote and develop a market for Tarmac MAPs.

In 1988, Stelwagon began actively promoting Tarmac MAPs as agreed. In order to build a demand for Tarmac's products, Stelwagon refrained from acquiring any new lines of MAPs, and ceased aggressive marketing of its other, non-Tarmac MAPs. Stelwagon sold Tarmac MAPs without incident in the relationship until early 1989, when Stelwagon became aware of sales made to several of its competitors in violation of the agreement.*fn6 At around the same time, Stelwagon also learned that Tarmac was selling MAPs to two competitors -- Standard Roofing Company ("Standard") and Celotex Corporation ("Celotex") -- at preferential prices. Stelwagon first complained to Tarmac about these sales, and eventually brought this action in February 1992.

At the close of Stelwagon's case, and again at the close of all evidence, Tarmac moved for judgment as a matter of law. Both of these motions were denied and the case was submitted to the jury, which rendered a verdict in Stelwagon's favor on both the price discrimination and breach of contract claims, and awarded damages in the amount of $2,272,000.*fn7 The district court trebled the antitrust damages under section 4 of the Clayton Act, and entered judgment for Stelwagon in the amount of $3,816,000. Tarmac renewed its motion for judgment as a matter of law and, alternatively, for a new trial. The district court denied the motions, but granted Tarmac's request for a remittitur based on a finding that "the damages awarded by the jury in this case are unsupported by the evidence and are grossly excessive." Stelwagon Manufacturing Company v. Tarmac Roofing Systems, Inc., 862 F. Supp. 1361, 1369 (E.D. Pa. 1994). The district court reduced the damages award for breach of contract to $74,242, and likewise reduced the antitrust damages to $450,383.50. After trebling the Robinson-Patman damages, the district court entered judgment for Stelwagon in the amount of $1,423,392.50. This appeal followed. We have jurisdiction under 28 U.S.C. § 1291.

On appeal, Tarmac challenges the district court's denial of its post-trial motions. Specifically, Tarmac claims that the judgment should be reversed because Stelwagon failed to present sufficient evidence to (1) establish a prima facie Robinson-Patman violation; (2) prove actual antitrust injury; and (3) support the award of damages under the Clayton Act. Tarmac also argues that Stelwagon's breach of contract claim is barred by the statute of frauds.*fn8 Our review of the district court's denial of Tarmac's motion for judgment as a matter of law is plenary. Intermilo, Inc. v. I.P. Enterprises, Inc., 19 F.3d 890 (3d Cir. 1994). The legal foundation for the factfinder's verdict is reviewed de novo while the factual findings are reviewed to "determine whether the evidence and justifiable inferences most favorable to the prevailing party afford any rational basis for the verdict." Id., quoting Bhaya v. Westinghouse Elec. Corp., 832 F.2d 258, 259 (3d Cir. 1987).

II. THE ROBINSON-PATMAN CLAIM

By its terms, the Robinson-Patman Act is a prophylactic statute and does not require that the alleged discrimination must in fact have harmed competition. J. Truett Payne Company, Inc. v. Chrysler Motors Corporation, 451 U.S. 557, 561, 68 L. Ed. 2d 442, 101 S. Ct. 1923 (1981). Instead, a violation is established upon a showing that "the effect of such discrimination may be substantially to lessen competition." Id. For the purposes of the Robinson-Patman Act, price discrimination means nothing more than a difference in price charged to different purchasers or customers of the discriminating seller for products of like grade or quality. Feeser, 909 F.2d at 1532; see also F.T.C. v. Anheuser-Busch, Inc., 363 U.S. 536, 549, 4 L. Ed. 2d 1385, 80 S. Ct. 1267 (1960). Price discrimination standing alone, however, is not illegal per se. Feeser, 909 F.2d at 1532; O. Hommel Co. v. Ferro Corp., 659 F.2d 340, 346 (3d Cir. 1981). Rather, in order to establish a prima facie violation of section 2(a), "a reasonable possibility of harm, often referred to as competitive injury, must be shown." Feeser, 909 F.2d at 1531.

A. Competitive Injury

1.

We note initially that as a prerequisite to establishing secondary line injury, a plaintiff must "first prove that, as the disfavored purchaser, it was engaged in actual competition with the favored purchaser(s) as of the time of the price differential." Best Brands Beverage, Inc. v. Falstaff Brewing Corporation, 842 F.2d 578, 584 (2d Cir. 1987). Moreover, to satisfy this "competitive nexus" requirement, it "must be shown that, as of the time the price differential was imposed, the favored and disfavored purchasers competed at the same functional level, i.e., all wholesalers or all retailers, and within the same geographic market." Id. at 585.

Tarmac claims that Stelwagon failed to show the requisite competitive contact with either Standard or Celotex and, as a result, did not establish a prima facie violation of the Robinson-Patman Act. Specifically, Tarmac argues that Stelwagon was not in competition with Standard because Standard operated its business outside of the geographical area where Stelwagon's principal customer base was located, and that Stelwagon was likewise not in competition with Celotex because the two companies did not operate at the same functional level, i.e., that they did not compete at the same distribution level because Celotex is a manufacturer and Stelwagon a distributor. The district court rejected these contentions and concluded that the record contained sufficient evidence to support a finding that both Standard and Celotex were in head-to-head competition with Stelwagon. We agree.

Standard is a distributor of roofing products and its customer base is similar to that of Stelwagon's. Although Standard is located in Trenton, New Jersey, there was evidence that Standard employed salespeople in Philadelphia and that it shipped directly to its Philadelphia customers from south Jersey. There was additional evidence that Standard was a principal competitor of one of Stelwagon's Philadelphia locations as well as Stelwagon's Camden, New Jersey location. In our view, this evidence was sufficient to support a finding of competitive contact between Stelwagon and Standard.

With respect to Celotex, we, too, reject the argument advanced by Tarmac that the weight of the evidence supports the Conclusion that Celotex was not in competition with Stelwagon. The basis of Tarmac's argument, as mentioned above, is that the two companies were not operating at the same functional level and were, therefore, not competing customers for purposes of the Act. See F.T.C. v. Fred Meyer, Inc., 390 U.S. 341, 348-49, 19 L. Ed. 2d 1222, 88 S. Ct. 904 (1968).

It is undisputed, however, that the MAPs sold by Celotex, under its own private label, were, in fact, "manufactured," that is, made, by Tarmac. It is also uncontested that the MAPs Tarmac produced for Celotex were identical to those Tarmac sold to Stelwagon except that they did not bear the Tarmac label. Although there was evidence that tended to support Tarmac's characterization of Celotex as a manufacturer,*fn9 the fact that there were conflicts and contradictions is of little significance, since the resolution of such inconsistencies is peculiarly within the province of the jury. In our view, the record as a whole contains sufficient evidence to support the jury's finding, in the first instance, ...


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