The opinion of the court was delivered by: SMITH
D. BROOKS SMITH, District Judge.
Precision Printing Company, a now-defunct business forms producer, has sued Unisource Worldwide for alleged acts of fraud, breaches of contract, and, most significantly, antitrust violations of the price-discrimination provisions of the Robinson-Patman Act, 15 U.S.C. § 13(a). Precision contends that Unisource, a major supplier of bulk paper, illegally gave Precision's competitors more favorable prices, increasing Precision's relative raw material costs and thereby making it uncompetitive in the forms marketplace. Precision also alleges that Unisource fraudulently misrepresented that it would give Precision its most favorable prices but failed to do so. Unisource denies all of these allegations and has counterclaimed for money Precision allegedly owes on various unpaid invoices. The parties have filed cross-motions for summary judgment and the case is now ripe for disposition. For the following reasons, I will deny plaintiff's motion and grant summary judgment to defendant.
Precision Printing Company was in the business of manufacturing and selling printed forms to businesses, banking institutions, health care facilities and other organizations.
It operated in the short-to-medium run segment of the market, generally producing 500 to 10,000 forms on any given order. Dkt. no. 25, at 105, 144. Precision's most significant raw material was blank paper, which averaged 55 to 75 percent of the cost of production, and 35 to 45 percent of the net sale price to the customer. Id. at 314, 331. Precision purchased paper from a variety of suppliers, but primarily from Unisource and its predecessor, Copco.
Dkt. no. 20, exh. 6, at 64-65, 68; dkt. no. 25, at 107.
Precision's two principal competitors were Business Forms, Inc. ("BFI") and Thornhill Printing, both of which were short or medium-run printers of comparable size. Dkt. no. 25, at 136-137, 144, 324, 328. All three manufacturers produced their product using essentially the same type of machinery, paper and techniques. See id. at 136, 143-44, 147-49, 152, 327.
Unisource is a Delaware corporation with its principal place of business in Columbus, Ohio. Its primary business is selling wholesale quantities of paper to commercial printing companies like Precision and its competitors, for which purpose it maintains a warehouse in Pittsburgh, Pennsylvania. Unisource sells on demand from this warehouse to fill the ad hoc needs of its customers; such transactions are referred to by the parties as warehouse sales. During the time period material to this litigation, Precision purchased all of its non-carbonless paper in this manner. Unisource also sells truckload quantities of paper, either directly from the manufacturer or from a Unisource warehouse outside Pennsylvania, in what are known as direct sales. These transactions typically involve lower prices than warehouse sales. Dkt. no. 20, Dunkle decl. P 3-4, exh. 7, at 27-28. In addition, Unisource operated a "Just-in-Time" ("JIT") plan, under which purchasers could obtain better prices and stabilized paper availability by committing to purchase specified quantities of paper.
In 1994, Unisource added a division known as Rollsource. The function of Rollsource was to service specifically the needs of those members of the web offset printing industry, such as Precision and its competitors, who purchased paper primarily in roll form. Dkt. no. 25, at 145-46. Rollsource apparently operated in a manner similar to the JIT plan. Precision, however, unlike its competitors BFI and Thornhill, was not given an offer to become a Rollsource customer. Id. at 343. Unisource typically purchased paper from Rollsource to service non-Rollsource customers like Precision, then "internally burdened" the transaction with overhead costs before setting the final price. Dkt. no. 33, exh. E, at 113-14, 153. As a result, those customers who remained with Unisource generally paid higher prices for paper than Rollsource customers paid.
All of Unisource's sales were made pursuant to invoices with "boilerplate" terms and conditions on the reverse sides. Dkt. no 20, Dunkle decl., P 2. Those terms included an integration clause and a contractual, one-year statute of limitations for any claims against the seller. The invoices made no representation regarding how the prices charged compared to the market in general or to any other customer in particular.
Precision Printing developed serious cash flow problems and began to fall behind in paying its paper suppliers sometime around 1992. As a result, some vendors placed Precision on COD status and would not sell product to it except for cash. Unisource, however, worked out payment terms that allowed Precision to continue buying paper while it paid down its past debt, although it refused to take Precision on as a Rollsource customer because of its credit history.
See dkt. no. 20, exh. 8 passim ; dkt. no. 33, exh. C at 22; exh. e, at 154-55. According to Precision, Unisource also promised to supply its paper needs at a price at or below "market."
Precision alleges that, in early 1995, it became aware that Unisource, contrary to its promise, was charging Precision twenty percent more for paper than the prices charged its competitors, Thornhill and BFI. Dkt. no. 25, at 131. That discovery was the impetus for the filing of this suit.
II. STANDARD FOR EVALUATING SUMMARY JUDGMENT MOTIONS
The standard for granting summary judgment is, twelve years after the Celotex trilogy of cases, well-established. Summary judgment shall be "rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). "The burden on the moving party may be discharged by showing . . . that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986) (internal quotation marks omitted). "Since a complete failure of proof concerning an essential element," 477 U.S. at 323-24, on which a party bears the burden of proof at trial establishes that the moving party is "entitled to a judgment as a matter of law," the nonmoving party must establish the existence of every element essential to [its] case. Id.
Once the moving party has satisfied its burden, the nonmoving party is required by Federal Rule of Civil Procedure 56(e) to establish that there remains a genuine issue of material fact. Clark v. Clabaugh, 20 F.3d 1290, 1294 (3d Cir. 1994). The nonmovant "may not rest upon mere allegation or denials of his pleadings, but must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). A fact is material if it "might affect the outcome of the suit under the governing law. . ." id. at 248, and is "genuine" "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. at 248, 257.
In determining whether a nonmovant has established the existence of a genuine issue of material fact requiring a jury trial, the evidence of the nonmovant must "be believed and all justifiable inferences are to be drawn in [its] favor." Id. at 255. Whether an inference is justifiable, however, depends on the evidence adduced. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 595-96, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). An inference based upon speculation or conjecture does not create a material factual dispute sufficient to defeat summary judgment. Robertson v. Allied Signal, Inc., 914 F.2d 360, 382 n.12 (3d Cir. 1990). Likewise, "simply showing that there is some metaphysical doubt as to the material facts" does not establish a genuine issue for trial. Matsushita, 475 U.S. at 586.
III. LIABILITY UNDER THE ROBINSON-PATMAN ACT
Precision contends that Unisource practiced price discrimination in violation of § 2(a) of the Robinson-Patman Act by granting Precision's principal competitors lower prices than it gave Precision.
This type of disparate pricing, in which a manufacturer or distributor favors certain of its customers at the expense of others, is known as secondary line discrimination, in contrast to primary line discrimination, in which one seller charges discriminatory prices in order to gain an advantage over its own competitors. See, e.g., Best Brands Beverage, Inc. v. Falstaff Brewing Corp., 842 F.2d 578, 584 n.1 (2d Cir. 1987); ABA Section of Antitrust Law, Antitrust Law Developments (hereinafter "ABA Treatise") 446 (4th ed. 1997); William C. Holmes, Antitrust Law Handbook § 3.03, at 494 (1997).
"Stated broadly, Section 2(a) of the Clayton Act provides that a seller cannot discriminate in price between purchasers of goods of like grade and quality where substantial competitive injury may result." Holmes, supra, § 3.02, at 483. Although the Act's purpose is simple to state, its interpretation and application are not; indeed, because of its imprecise drafting, numerous courts and commentators have noted that Robinson-Patman is one of the most difficult, if not inscrutable, antitrust laws in existence. As one commentator has written:
The Robinson-Patman Act of 1936 is the most awkwardly drafted of all antitrust legislation. This statute was a roughly hewn, unfinished block of legislative phraseology when it left Congress, and has required much interpretive refinement by the [Federal Trade] Commission and the courts to reveal the contours of its meaning and application. Indeed, so confusing is some of this language that experience in applying its provisions is the only reliable guide for the wise practitioner.
Jerrold G. Van Cise et al., Understanding the Antitrust Laws 56 (9th ed. 1986); accord Automatic Canteen Co. v. Federal Trade Comm'n, 346 U.S. 61, 65, 73 S. Ct. 1017, 1020, 97 L. Ed. 1454 (1953) (Frankfurter, J.) ("precision of expression is not an outstanding characteristic of the Robinson-Patman Act"); Robert H. Bork, The Antitrust Paradox 382 (2d ed. 1993) (referring to the Act as "the misshapen progeny of intolerable draftsmanship coupled to wholly mistaken economic theory"); Holmes, supra, § 3.02, at 483 (the Robinson-Patman Act is "the most complex and controversial of the antitrust laws"); ABA Treatise, supra, at 429 (the Act's "complex draftsmanship has led to extensive interpretation").
Section 2(a) of the Robinson-Patman Act provides that:
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 either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, and 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 either grants or knowingly receives the benefit of such discrimination, or with customers of either of them: Provided, That nothing herein contained shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered: Provided, however, That the Federal Trade Commission may, after due investigation and hearing to all interested parties, fix and establish quantity limits, and revise the same as it finds necessary, as to particular commodities or classes of commodities, where it finds that available purchasers in greater quantities are so few as to render differentials on account thereof unjustly discriminatory or promotive of monopoly in any line of commerce; and the foregoing shall then not be construed to permit differentials based on differences in quantities greater than those so fixed and established: And provided further, That nothing herein contained shall prevent persons engaged in selling goods, wares, or merchandise in commerce from selecting their own customers in bona fide transactions and not in restraint of trade: And provided further, That nothing herein contained shall prevent price changes from time to time where in response to changing conditions affecting the market for or the marketability of the goods concerned, such as but not limited to actual or imminent deterioration of perishable goods, obsolescence of seasonal goods, distress sales under court process, or sales in good faith in discontinuance of business in the goods concerned.
15 U.S.C. § 13(a). I will now proceed to analyze the facts presented by this record against the recognized elements of a case arising under the above-quoted statutory provision.
B. The Commerce Requirement
Section 2(a) of the Act makes it "unlawful for any person engaged in commerce, in the course of such commerce, . . . to discriminate in price . . . where either or any of the purchases involved in such discrimination are in commerce. . . ." 15 U.S.C. § 13(a) (emphases added). Thus, the plaintiff must establish three elements to meet the commerce requirement: (1) the defendant must be engaged in interstate commerce; (2) the price discrimination must occur in the course of that commerce; and (3) at least one of the transactions that the plaintiff proffers for comparison to prove discriminatory pricing must have actually moved in commerce; that is, crossed a state line. Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 195, 200, 42 L. Ed. 2d 378, 95 S. Ct. 392 (1974).
As a practical matter, if the third element is satisfied, the first two will be as well. See Liquilux Gas Servs. v. Tropical Gas Co., 303 F. Supp. 414, 416-17 n.2 (D.P.R. 1969); In re International Tel. & Tel. Corp., 104 F.T.C. 280, 419 (1984); ABA Treatise, supra, at 430 & n.9.
In any event, Unisource does not dispute, nor could it, that it engages regularly in interstate commerce. The fact that it purchases and sells paper from out-of state manufacturers through warehouses in several states to customers dispersed among those states satisfies this requirement. Moreover, it is clear that Unisource's alleged price discrimination took place "in the course of such commerce." The discrimination Precision alleges occurred in the course of Unisource's regular business of selling paper, not in some isolated transaction unrelated to it, such as the sale of a used forklift from Unisource's warehouse.
That leaves the question, did the goods in at least one of the sales that Precision must compare to prove discriminatory pricing physically cross a state line? In the direct sense, the answer is "no." Precision, its principal competitors and the Unisource warehouse through which the shipments passed are all located within Pennsylvania. From this, Unisource argues that its sales fail the commerce test set forth in Copp. This is only partly correct.
The Supreme Court disagreed, holding that, under the stringent commerce test set forth in the Act, one or more of the compared transactions must cross a state line. Id. at 200. In so holding, the Court stressed the need for the "facially narrow" language of the Act to be applied in a manner that is "anchored to the economic realities of interstate markets, the intensely practical concerns that underlie the purposes of the antitrust laws." Id. at 198. Thus, the Court opined that the Act reaches "only persons or activities within the flow of interstate commerce--the practical, economic continuity in the generation of goods and services for interstate markets and their transport and distribution to the consumer." Id. at 195.
A similar result was reached in Coastal Fuels, Inc. v. Caribbean Pet. Corp., 79 F.3d 182 (1st Cir.), cert. denied, 136 L. Ed. 2d 214, 117 S. Ct. 294 (1996). There, plaintiff operated a refined petroleum distribution business in Puerto Rico, which sold, inter alia bunkering oil used to fuel ships. Defendant operated an oil refinery on the same island. 467 U.S. 752 at 786, 104 S. Ct. 2731, 81 L. Ed. 2d 628. Plaintiff alleged that defendant practiced price discrimination by selling fuel to plaintiff's competitors at lower prices, eventually forcing plaintiff out of business. The court held that § 2(a) of the Robinson-Patman Act could not be applied because none of the sales had crossed a state line. 79 F.3d at 189, 190.
This general rule is refined, however, by the "stream of commerce" doctrine. When a manufacturer ships its goods in interstate commerce to a wholesaler's warehouse for its general inventory, any otherwise intrastate sales the wholesaler then makes to its customers are not considered "in commerce." The stream of commerce is deemed to have been broken. As one court put it:
The flow of commerce ends when goods reach their "intended" destination. In gauging the point of destination courts consider whether goods coming from out of state respond to a particular customer's order or anticipated needs. If so, the sales meet the "in commerce" requirement even though the goods may be stored in a warehouse before actual sale to the buyer. However, goods leave the stream of commerce when they are stored in a warehouse or storage facility for general inventory purposes, that is, with no particular customer's needs in mind.
Zoslaw v. MCA Dist. Corp., 693 F.2d 870, 878 (9th Cir. 1982) (citations omitted).
Accordingly, it is generally held that such warehouse sales lose their intrastate character, notwithstanding an intrastate sale, if any of the following three conditions are met: (1) the goods are purchased by the supplier upon the order of a customer with the definite intention that the goods are to go at once to the customer; (2) the goods are purchased by the supplier to meet the needs of specified customers pursuant to some understanding with the customer, even though the goods are not to be delivered to the customer immediately; (3) the goods are purchased by the supplier based upon anticipated needs of specific customers. See, e.g., L & L Oil Co. v. Murphy Oil Corp., 674 F.2d 1113, 1116 (5th Cir. 1982); Luzerne & Lackawanna Supply Co. v. Peerless Indus., Inc., 855 F. Supp. 81, 85 (M.D. Pa. 1994); Callahan v. AEV, Inc., 1994 U.S. Dist. LEXIS 19761, No. 92-556, 1994-2 Trade Cases (CCH) P 70,761, 1994 WL 682756, *7 (W.D. Pa. Sep. 26, 1994) (citing cases); cf. Standard Oil Co. v. FTC, 340 U.S. 231, 237-38, 71 S. Ct. 240, 243-44, 95 L. Ed. 239 (1951) (gasoline stored at bulk facility in anticipation of customers' anticipated winter demands remained in interstate commerce).
Unisource's sales to Precision's competitors stand on a somewhat different footing. Those customers commonly purchased by the truckload or through the JIT program, whether from Unisource or Rollsource. Truckload sales were shipped from outside Pennsylvania and thus directly satisfy the commerce requirement. And in order to participate in the JIT program, purchasers had to commit to certain tonnage requirements in advance. Accordingly, all of Unisource's purchases from the various paper manufacturers to supply its JIT requirements were made to meet "the anticipated needs of specific customers," Murphy, 674 F.2d at 1116. As to these sales, the stream of commerce was not broken and the commerce requirement was accordingly met. To recapitulate, all of the competitors truckload and JIT sales remained in commerce.
For any claim asserted under § 2(a) of the Robinson-Patman Act to succeed, the plaintiff must adduce evidence of an actual instance of price discrimination. This requirement is straightforward: under the 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." Stelwagon Mfg. Co. v. Tarmac Roofing Sys., Inc., 63 F.3d 1267, 1271 (3d Cir. 1995) (citing cases); accord Texaco, Inc. v. Hasbrouck, 496 U.S. 543, 559, 110 L. Ed. 2d 492, 110 S. Ct. 2535 (1990) ("price discrimination within the meaning of § 2(a) is merely a price difference"). The different prices, however, must have been charged at reasonably contemporaneous times. See Zwicker v. J.I. Case Co., 596 F.2d 305, 309 (8th Cir. 1979); Atalanta Trading Corp. v. FTC, 258 F.2d 365, 371-72 (2d Cir. 1958) (§ 2(d) case).
2. Facially Disparate Prices
There is no question that Unisource made sales to two or more different purchasers, or that the products sold were of like grade and quality. Precision, Thornhill and BFI all purchased standard grades of roll paper from Unisource. Nor can it be seriously contended that the sales were not reasonably contemporaneous; indeed, the record indicates that at least one pair of sales took place on the same day. Dkt. no. 25, at 243-44.
The record also indicates that the same product was sold at facially different prices. On February 8, 1994, for example, Precision purchased 12 pound white forms bond and 15 pound white forms bond paper from Unisource (Copco), priced at $ 57.00 and $ 50.50 per hundredweight, respectively. That same day, BFI purchased the ...